Article by Greg Lindsay
Fast Company  |  December 2012/January 2013

Imagine Air Travel Without Hassle: Surf Air Can

Upstart airline surf air is changing everything fliers hate about major carriers. (Which is to say, everything.)

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Eight years ago, before the TSA began scanning passengers’ privates as a matter of course, Wade Eyerly was working as an advance man for Vice President Dick Cheney, traveling 27 days a month on last-minute, one-way tickets. Naturally, that buying pattern put him at the top of every screener’s watch list. So even though he could get close enough to the vice president to hug him (assuming the veep did hugs), he couldn’t board a plane without a pat-down. “Clearly, something was wrong with the system,” Eyerly says today. “And when something is that wrong, we should fix it.”

In Eyerly’s mind, fixing air travel meant starting an airline that opts out of the TSA and tickets altogether. The result is Surf Air, the first all-you-can-fly carrier. For $1,000 a month, members will be able to travel anywhere on Surf Air’s system as often as they’d like. Beginning at the end of 2012 (pending FAA approval), the airline will link four California regions—Los Angeles, Santa Barbara, Monterey, and the San Francisco area—using eight-seat planes outfitted like private jets. From there, it plans to expand regionally and then nationally, connecting short-hop city pairs such as Seattle-Portland or Dallas-Austin and avoiding congested hubs in favor of small airfields with no waits and no bureaucrats.

With its regional focus and fleet of puddle-jumpers, Surf Air poses little threat to the current titans of the skies. Despite a growing number of consumer complaints, the past three years have been among the best in the U.S. airline industry’s history—it raked in a record-breaking $10.5 billion in operating profits in 2010, according to the Bureau of Transportation Statistics, and $7.1 billion last year. But Surf Air does raise a big question: In a hopelessly sclerotic industry that nevertheless produces billions in profits, why aren’t more companies taking a run at the incumbents?

Working in Surf Air’s favor is that unlike previous upstarts such as JetBlue—whose founder raised $128 million at the outset to buy jets—it’s the first airline launched like an app. Eyerly and his brother Dave (a pilot and former TSA employee) took their idea to MuckerLab in Los Angeles and graduated last spring with $4 million in venture capital, led by Santa Monica’s Anthem Venture Partners. They borrowed their business model from Netflix, and all bookings will be handled via apps and online. The actor-musician Jared Leto, who has invested in Surf Air, compares the airline to Uber, the taxi-summoning service.

Technically, Surf Air isn’t even an airline. The FAA considers it a charter service with permission to fly on regular schedules, so it will be exempt from TSA scrutiny. Surf Air will fly where airlines don’t—from Santa Monica Municipal Airport, say, rather than LAX. As Eyerly points out, 90% of America’s nearly 20,000 airfields operate well below capacity. “It’s an interstate highway system without any cars,” he says.

Surf Air clients will encounter no friction before flights. An iPad-wielding concierge will greet them at the airfield. Then they will walk to the plane—a Pilatus PC-12, which has the legroom of a Learjet but consumes considerably less fuel. Besides flying as often as they wish, members can travel at the last minute without penalty. Echoing Netflix’s DVD subscription model, the only limit is the number of one-way reservations members may hold at a time (six).

Surf Air plans to launch with no more than 500 members, each paying $1,000 a month. Membership will be capped for three months as the airline gets a handle on passenger behavior. “You’re looking at an airline built for frequent fliers,” says Eyerly. “There’s no data that says what will happen when their per-flight costs drop to zero. The only way to get it is to fly.”

There does seem to be a market—nearly 50,000 “supercommuters” regularly fly or drive between the Bay Area and Los Angeles, according to New York University’s Mitchell Moss. And even cynical aviation analysts concede the all-you-can-fly model has merit. “It’s an interesting experiment,” says Teal Group vice president Richard Aboulafia, although the price doesn’t make sense to him. “Profits would be eaten up fast,” he says. Other analysts predict the price will rise as Surf Air tweaks its model.

Cutting costs is what created an opening for Surf Air in the first place. The major carriers are saving money with what is, at the moment, a winning formula: fewer routes, tighter planes, and hidden charges. As the experience for passengers has worsened, profits have swelled. U.S. carriers effectively break even on airfares while earning nearly all of their profits from nickel-and-diming passengers; in the first half of 2012, ticket and baggage fees totaled more than $3 billion. These are a textbook example of what Bain & Co.‘s Fred Reichheld has labeled “bad profits”—the kind earned from abusing customers rather than creating value for them. The upside of bad profits, Reichheld writes, is that sooner or later they will inspire someone to disrupt them—consider how Blockbuster’s punitive late fees created an opening for Netflix. Yet few entrepreneurs are trying to take advantage of the pent-up frustration with air travel.

The reason is that major airlines pounce when they see turf worth having. As ill-fated air-taxi pioneers like Pogo, DayJet, and SATSair learned nearly a decade ago, once an upstart begins having success with an underserved route, larger carriers will come in, often operating at a loss, and push them out. “Your model has to scale immediately and be disruptive out of the box,” says DayJet founder Ed Iacobucci. “Otherwise, the airlines will come down hard on you.”

Surf Air may soon discover this for itself. Already, a former Google engineer named Shawn Simpson has quietly formed Boutique Air, relying on the same FAA loophole, the same market (northern California and the Pacific Northwest), and the same strategy (flying to small airports with small planes).

Perhaps a new model of air travel requires a more fundamental disruption. Bruce Sawhill, a physicist who worked for Iacobucci, suggests that one cost bottleneck is in the cockpit—two pilots for a half-dozen passengers is too expensive. “Something like DayJet will work under certain circumstances,” Sawhill says, “but it will only work big-time when planes are electric and robotic.” Anyone want to book a ticket on Drone Air?

WSJ  |  November 2012

Jeanne Gang

The renegade architect on intervening with nature, creating happier suburbs and why coyotes have a place in cities

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THE WORK OF 48-YEAR-OLD JEANNE GANG may at last herald the end of the starchitect era. The founder of Chicago’s Studio Gang Architects puts more faith in her raw materials–and the purposes they can be put to–than in the pursuit of iconic shapes or the mind- bending possibilities of computer-aided design. That’s not to say her buildings aren’t expressive in form. The rippling concrete balconies of her 82-story skyscraper, Aqua Tower, flow in gentle undulations. But they’re also functional: Their shape disrupts gales off Lake Michigan, allowing residents to sun themselves eight hundred feet in the air.

Gang designs slowly, buying time to consult her team of ecologists, hydrologists, artists and engineers. She also delves deeply into the limits of her materials, first exploring their physical capabilities in her Wicker Park studio, then allowing their attributes to dictate her projects’ form. Gang is the rare architect who loves nature and tall buildings, classical techniques and new technology. She sees herself not as an artist, but as a dot connector, a problem solver. Her other Chicago works include the Nature Boardwalk at Lincoln Park Zoo, which inserted a wild urban habitat adjacent to the city’s Gold Coast, and plans for Northerly Island, which will transform the former Meigs Field airport into a waterfront park with a reef. Among her most recent projects are a proposal to reverse the flow of the Chicago River to restore its polluted banks, and reimagining suburbia in “Foreclosed: Rehousing the American Dream,” an exhibit at New York’s MoMA this spring.

Gang receives the museum treatment herself this fall with “Building: Inside Studio Gang Architects” at the Art Institute of Chicago (September 24–February 24, 2013). It isn’t a retrospective–Gang is young by architecture’s standards–but an intimate snapshot of “a practice that’s just hitting its stride,” she says. The same is undoubtedly true of Gang herself, who last fall was named a MacArthur Foundation Fellow–the first architect to win the so-called “genius” grant in more than a decade. “Gang is setting a new industry standard,” the foundation remarked about its pick. Translation: These times call for buildings that are inexpensive, beautiful and sustainable.

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I’M IN AWE OF NATURE and its incredible variety and creativity, but we’ve been messing with it since the beginning of time. We design nature these days. We learn from it and then intervene. In one instance, we proposed reestablishing the natural division between the Great Lakes and the Mississippi River watersheds (essentially disconnecting them) in order to restore the banks of the Chicago River. But it’s been altered so many times–and so destructively–that it’s not as though we’re restoring a pure state of nature.

The truth is that cities and nature are completely intertwined, and we should find ways to make them seamless. With the human population now at seven billion and climbing, cities have become huge territories that don’t allow the passage of other species through them. What’s interesting to me is figuring out how closely we can get these two communities to intersect, so that animals can have their territory while at the same time increasing and concentrating the human population. We can bring seams of nature–like veins–through the middle of the city. We need to.

At the Lincoln Park Zoo, we turned a 19th-century picturesque pond into a real habitat. The number of species has soared; coyotes visit on a nightly basis. It’s really buzzing and wild, right smack in the middle of the city. I’ve always been worried about the loss of bio-diversity, which is partly the result of sprawling cities. If we can find a way to build these habitats within them, it will make cities better and more exciting.
Biomimicry–borrowing ideas from the natural world–is a valuable tool, but I’m not interested in just mimicking forms. If you start there, you run up against the limits of your materials. But if you start with your materials, you unlock so many potential ways the architecture can take shape. For me, starting with the materials is nature. It means basing your design on what the material is naturally capable of, and how you can push it. It’s a lot different than settling on an iconic form that looks natural and then trying to figure out how to build it.

We’re at the end of a boom that demanded architects focus on iconic buildings that prized shape over structure and form. On the plus side, it pushed forward our understanding of both. Some of the buildings completed in the last 10 years would not have been possible at any other time in history. The fact that the Burj Khalifa in Dubai exists blows my mind–it’s just awesome. But now we’re at the dawn of a new mode of work requiring cross-collaboration, and somebody who can see all the different facets of a problem is critical. We see it in science all the time, where none of the most important problems can be tackled by a single discipline.

For our work exploring the future of suburbia, we asked, “How can we deal with a polluted postindustrial landscape while making room for more residents and giving them space to both live and work?” In Cicero, a Chicago suburb with thousands of foreclosures and a booming immigrant population, we interviewed local residents, real-estate developers, housing, immigration and financial-policy experts and even the owners of the freight rail lines that run through town. I assembled a team that knew their way around the suburbs, including people like Theaster Gates (see page 98), an artist who knows how to start dialogues with communities. We synthesized our ideas into a proposal: select an abandoned factory site, salvage its materials and reuse them to build à la carte housing that better fits the needs of extended immigrant families. The project is a completely new way of envisioning the suburbs, integrating all aspects of life instead of separating them into live, work and play.

Architects have a powerful role to play in solving some of society’s most pressing issues, like urbanization. The design of a city can either make life exciting or pure hell. I think we have something important to offer. That’s probably one reason a lot of us at Studio Gang still work into the late hours of the night. What drives us is the possibility of making a breakthrough. That’s my adrenaline: To think that, one of these nights, we might end up changing the world.

–Edited from Greg Lindsay’s interview with Jeanne Gang.

Fast Company  |  June 2012

That’s So Fly

Brazil, China, and Russia take to the skies, bidding for large shares of the $2 trillion narrow-body-jet market.

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Twenty-two kilometers east of the booming Chinese city of Kunming, a giant bird sits on a dusty plateau. Its golden wings stretch hundreds of meters out, as if ready to take flight. Soon it will, at least figuratively: This bird-shaped structure is the Skidmore, Owings & Merrill-designed terminal of Kunming Changshui International Airport, which, after its June 28 opening, will serve 27 million passengers a year (roughly on par with Boston’s Logan and New York’s LaGuardia). Changshui’s two runways will be long enough to handle huge A380s and B747s. But mostly, you’ll find the tarmac filled with smaller single-aisle flying workhorses better suited to shuttling to and from other Chinese boomtowns—A320s, Boeing 737s, and, if Beijing has its way, Chinese-built C919s.

Thanks to strong growth in emerging markets, sales of such aircraft should be robust over the next two decades. Airbus and Boeing both project sales of about 20,000 single-aisle commercial jets over that time, worth almost $2 trillion. The two aerospace titans have long enjoyed a near duopoly. But state-backed firms in Brazil, China, and Russia want in on that lucre, and they’re working to offer their homegrown airlines a compelling, locally built alternative to A and B.

Brazil’s Embraer is out in front, having established its cred with its E-Jets, more than 800 of which have been sold since 2004. The slender aircraft, which seats up to 120 passengers, is a fixture in the fleets of airlines including Air Canada, JetBlue, and US Airways. Late last year, Embraer announced plans to build on that success, developing a new generation of E-Jets with bigger engines and more seats that could take off in the next five years.

Contrast Embraer’s relative ubiquity with Sukhoi, which is best known for Cold War fighter jets. The Sukhoi Superjet 100, produced through a joint venture with Italy’s respected Alenia Aermacchi, is Russia’s first new commercial airliner since Soviet days, when it churned out crash-prone Tupolevs and Antonovs. But since the 100-passenger jet entered service last year—Armenia’s Armavia was the first buyer—it has found few takers outside the ex-U.S.S.R. and was only recently approved to fly within the EU. That hasn’t stopped Sukhoi from announcing the even more ambitious 130NG, a stretched 130-seat version that will compete directly with Boeing’s 126-seat 737-700 and the 124-seat Airbus A319.

Russia’s Superjet and China’s Comac C919—which will be a similar size—are both dependent on government backing. Russian leader Vladimir Putin has strong-armed domestic airlines into ordering the Superjet, and most of the Comac C919’s 235 orders come from Chinese state-owned companies. There’s a rich tradition of this kind of thing in the jet business; while Washington and Brussels haven’t officially pushed their airlines to buy local, Boeing and Airbus have benefited from billions in public aid, including subsidies and tax credits.

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Boeing spokesman Doug Alder accepts that “the duopoly is over,” but the true magnitude of the threat will depend on the new jets’ quality, which is still far from uniformly superior. Only Embraer, which isn’t controlled by Brazil’s government, has shown that it can produce world-class aircraft, and traditionally, says aviation analyst Richard Aboulafia of the Teal Group, “state-owned companies make terrible airplanes.” In other words, we’ll see if the golden goose that these countries seek can actually take flight.

UPDATE: On May 9, after the magazine edition of this story went to print, a Sukhoi Superjet 100 carrying 50 airline representatives and journalists crashed into the side of an Indonesian mountain volcano after losing contact with ground controllers halfway through a 50-minute test flight across Jakarta. The fatal accident, which interrupted Sukhoi’s six-country tour for potential Superjet buyers, is the most serious in a string of cited incidents since the aircraft went into service.

EMBRAER E-JET, BRAZIL
Length: 118 ft. 11 in. Height: 33 ft. 9 in. Wingspan: 94 ft. 3 in.

// Embraer’s new-generation E-Jet will boast a new engine, likely from the U.S. builder Pratt & Whitney, whose geared turbofan model decouples the turbine from the air-intake fan at the front. That allows both to operate at optimum speeds while cutting fuel burn by up to 15% and emissions by 35%.

// Size does matter: Embraer is aiming for the historical no-man’s-land of a 90- to 120-seat aircraft. Demand for that niche alone is 4,125 planes over the next two decades, it says—a market worth at least $154 billion at list prices.

// Embraer is also considering cockpit updates, including a full fly-by-wire flight-control system, for the revamped E-Jet. This would replace conventional manual controls, relying on computers to run almost everything up front.

Sukhoi Superjet 100, Russia
Length: 97 ft. 10 in. Height: 33 ft. 8 in. Wingspan: 91 ft. 2 in.

// In 2010, Russian leader Vladimir Putin publicly criticized Aeroflot’s CEO for not buying domestic jets. “You want to dominate the domestic market, but you don’t want to buy Russian technology,” Putin said. “That won’t do.” Aeroflot has since ordered 30 Superjets.

//The stretched 130-seat Superjet 130NG model will boast composite wings, reducing operating costs by 10% to 12%.

// The Superjet 100 is a remarkably global project. While Russia’s Sukhoi and Italy’s Alenia control the joint venture, the landing gear is made by France’s Messier Bugatti Dowty, and the wheels and brakes come from America’s Goodrich.

// Passengers will notice the Superjet 100’s signature feature by its absence: noise. Russian airliners are notoriously loud—to the point where some have been banned from European airspace. Superjet makes a selling point of its uncharacteristically quiet Franco-Russian engines.

Comac C919, China
LENGTH: 126 ft. 6 in. Height: 41 ft. Wingspan: 116 ft. 7 in.

// Comac will supply the airframe; foreign partners such as GE Aviation, Honeywell, and Rockwell Collins will provide everything else, from the engines to entertainment systems. “Technology transfer” to their Chinese partners is the price of admission to a jet market estimated to be worth $40 billion through 2030.

// One advantage of state-controlled capitalism is a captive market. The largest customers to date for the C919, which won’t enter service until 2014 at the earliest, are China’s state-owned airlines, including Air China and China Southern, and leasing companies.

// Comac’s likeliest foreign buyer is the budget carrier Ryanair, whose CEO, Michael O’Leary, has spoken publicly about his desire to break the Airbus/Boeing duopoly. He’s pushing Comac to squeeze in more seats—and Ryanair is considering asking Comac to add standing-room “seating.”

Next American City  |  May 2012

Chartered Territory

Can a New Model for Cities Thrive in Honduras?

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On a bright November morning in Manhattan, several hundred luxury goods executives filed into the basement auditorium of the Morgan Library expecting to hear Paul Romer speak about China and innovation. Courtly, earnest and reserved, Romer is an academic economist by training, and it shows. Before the crowd’s caffeine could kick in, he offered a modest proposal: Rather than start the next Louis Vuitton, we should knock off Hong Kong. Cities can be startups too, he said. “We can build new ones much faster than people think.”

That’s what China’s paramount leader Deng Xiaoping thought in 1979 when he designated Shenzhen as the country’s first special economic zone. In less than 30 years, Romer explained, the fishing village across the border from Hong Kong had become a capitalist enclave larger and more populous than New York. Shenzhen, in turn, kicked off China’s transformation from a rural backwater to an export-driven powerhouse. Hong Kong and its copies, Romer likes to say, have done more to eliminate poverty than all the foreign aid put together, and he may be right. China lifted 660 million of its citizens out of absolute poverty between 1981 and 2008 – more than the rest of the world combined.

Romer’s appearance that morning was a favor to the hosts, his new colleagues at New York University’s Stern School of Business. A year ago, Stern lured the eminent economist back to academia with a $10 million gift for the Urbanization Project, a personal think tank devoted to creating new “charter” cities and massively expanding existing ones, thus planting the school’s flag in what dean Peter Henry believes will be a $20 trillion market in financing urbanization – and the next line of work for Stern graduates.

“We will do more urbanization in this century than we’ve done in all of history,” Romer said from the stage. “Whatever we do will establish the pattern that will last forever.” Expecting a day of social media tips and fireside chats with CEOs, the audience sat stunned – who decides that what the world needs now are mega-cities built from scratch in the its poorest places?

The rest of this story can be purchased at Next American City.

The New York Times  |  Feburary 2012

Designing a Fix for Housing

by Jeanne Gang and Greg Lindsay

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RECENT efforts to fix the housing market – including Thursday’s $26 billion settlement with five of the nation’s biggest banks – have focused purely on the financial aspects of the slump. A permanent solution, however, must go further than money to address issues that have been at the core of the crisis but have been wholly ignored: design and urban planning.

Too often during the bubble, banks and builders shunned thoughtful architecture and urban design in favor of cookie-cutter houses that could be easily repackaged as derivatives to be flipped, while architects snubbed housing to pursue more prestigious projects.

But better design is precisely what suburban America needs, particularly when it comes to rethinking the basic residential categories that define it, but can no longer accommodate the realities of domestic life. Designers and policy makers need to see the single-family house as a design dilemma whose elements – architecture, finance and residents’ desires – are inextricably linked.

Take Cicero, Ill., a Chicago suburb that we studied as part of a new exhibition on the housing crisis at the Museum of Modern Art. The town may be infamous as the base of Al Capone or the site of anti-integration protests in the 1950s and ’60s, but today 80 percent of its residents are Latino, half of them foreign born.

Cicero is representative of a suburban transformation that went little noticed during the housing bubble and bust: suburbs have replaced inner cities as the destination of choice for new immigrants.

Indeed, nearly half of all Hispanics now live in suburbs, and new arrivals favor them over cities by two to one. Immigrants are one reason the number of suburban poor climbed 25 percent nationwide between 2000 and 2008. They’re also why Cicero was hit so hard by the housing crisis, with 2,049 foreclosures in 2009 alone – the second highest in Illinois, after Chicago.

Here’s where design comes in. Most of Cicero’s housing is detached, single-family homes. But these are too expensive for many immigrants, so five or six families often squeeze into one of Cicero’s brick bungalows. This creates unstable financial situations, neighborhood tensions and falling real estate values.

Too often, we see such mismatches as a purely financial issue. But instead of forcing families to fit into a house, what if we rearranged the house to fit them?

This doesn’t mean bulldozing Cicero’s housing stock. Instead, it means using existing, underused properties that might be renovated to provide a better fit. In Cicero’s case, that might mean turning to the scores of abandoned factories around it.

Such buildings are often no man’s lands thanks to fears of industrial contamination, which have left older suburbs pockmarked by blight while jobs and homes sprawl outward. But new techniques like “phytoremediation” – using plants like poplar and willow trees to absorb toxins – open the door to safer, less-expensive rehabilitation.

What remains is a wealth of steel, masonry and concrete that could be recycled into flexible live/work units. Rather than force Cicero’s residents to contort themselves to fit the bungalows, their homes can expand or shrink to fit them.

There’s one problem with such a plan: it’s illegal under Cicero’s zoning code. The town’s rules are typical of most suburbs, including the segregation of residential, commercial and industrial facilities; prohibitions on expanding and reusing buildings for new homes and businesses; and tight restrictions on mixed-use properties. Cicero’s code also defines “family” in a way that excludes the large, multigenerational groupings now common across the country.

This has been an issue for urban planners for years, but many of the proposed alternatives to suburban zoning merely swap one restrictive code for another. Only by loosening zoning to allow new combinations of home and work will we be able to bring innovative design to bear on the single-family house.

But new housing forms also demand new types of financing. Starting in the 1990s, subprime lenders targeted low-income and minority suburbs like Cicero, even when many residents would have qualified for prime loans. Latino homeowners tend to disproportionately invest savings in their homes, and as a result they lost two-thirds of their wealth between 2005 and 2009.

One long-term solution would be a type of co-op in which residents buy and sell shares according to their changing needs and circumstances. Unlike traditional co-ops, residents could purchase shares corresponding only to the units they occupy, not the land beneath, which remains in the hands of a “community land trust.” Such a structure would keep housing costs down while limiting residents’ exposure to the market. It would also provide a backstop for struggling homeowners, since the trust would have the legal right to step in and assist residents in the event of foreclosure.

Land trusts have thrived on a small scale in New York City and Chicago, among other places. The federal government should now scale up the efforts by transferring some of the nearly 250,000 foreclosed homes acquired by Fannie Mae, Freddie Mac and the Federal Housing Administration into a national trust or a series of local trusts.

Even after the housing crisis is over, we will need to build connections among local government officials, policy makers, financial institutions, residents and architects. Solving the slump requires a multidisciplinary approach combining new design, new paths to homeownership and new zoning to support both – in Cicero and beyond.

Jeanne Gang and Greg Lindsay are, respectively, an architect and a visiting scholar at the Rudin Center for Transportation Policy and Management at New York University.

Departures  |  October 2011

Instant Cities

Are made-from-scratch metropolises the answer to Asia's urban overpopulation? Greg Lindsay investigates.

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Two years ago, developer Stan Gale cut the ribbon on the world’s newest city–a man-made island in the Yellow Sea named New Songdo. The chairman of New York-based Gale International had pledged in 2001 to borrow $35 billion to build a city the size of downtown Boston modeled on Manhattan, complete with a hundred-acre “Central Park” fronted by South Korea’s tallest building. Songdo won’t be finished until 2016 at least, but Gale isn’t waiting around. These days, he’s pitching China’s mayors on his “city-in-a-box”–a kit to build their own smart, green city of the future in as little as three years. “We’re going to be the special sauce of city-building,” he vows.

Is it even possible to build a city from scratch, at least one we would want to live in? This may be the defining challenge of our era–Earth’s urban population will nearly double by 2050, requiring the construction of hundreds of new cities. China is already building the equivalent of a Rome every few weeks to absorb another 400 million peasants streaming from the countryside in search of work. The question facing us as an urban species isn’t whether to build cities tabula rasa, but how. And nowhere is this dilemma more pressing than in Asia.

The archetypal Asian city isn’t Art Deco Shanghai or post-war Tokyo, but the “Overnight City” of Shenzhen, which was still a fishing village when it was tapped to be Communist China’s capitalist enclave more than thirty years ago. Today, it’s a sub-tropical metropolis of 14 million sprawling for miles, sprouting clusters of skyscrapers from an impenetrable canopy of factories and elevated highways. Unplanned and uncontrollable, Shenzhen and its neighboring cities represent 20th-century urbanism at is worst–ugly, inequitable, and unsustainable. Surely we can do better in the 21st?

Plans for utopian cities date back to the Renaissance, although a modern example is Brasilia, the Oscar Niemeyer-designed, made-to-order capital built in 41 frenzied months during the ‘50s. Following Brazil’s lead, Malaysia started construction on its own new administrative center in the late ‘90s. The domes and spires of Putrajaya and its sister city, Cyberjaya,, were hacked from rubber and palm plantations and linked to Kuala Lampur, 15 miles to the north, via a fiber-optic “Multimedia Super Corridor.”

But what was supposed to be Southeast Asia’s answer to Silicon Valley turned out to be too much of a backwater to attract the country’s entrepreneurs, who preferred Kuala Lumpur. Instead, with a current population of around 68,000, Putrajaya ended up a quiet, manicured campus for technocrats–a Washington, D.C. without the tourists. South Korea is heading for the same situation next year with Sejong,, a “multifunctional administrative city” two hours’ drive south of Seoul. Originally envisioned as a new capital, it will become the home of several exiled government ministries. (An epic power struggle over its fate last year threatened to split the ruling political party in two, and its critics doubt whether anyone will actually move there from Seoul.)

More than politics, sustainability is the driving force behind these developments. While half of humanity now lives in urban areas–whether high-rises, suburbs, or slums–cities consume 75 percent of all energy, suggesting that building cleaner ones is the key to combating climate change. This goes double for China, the world’s biggest polluter and burner of coal. What’s missing is a prototype for the cities environmentalists have in mind. Lying west of Beijing–the home of weeklong traffic jams–Mentougou Eco Valley,  aims to be the first.

Designed by Helsinki’s Eriksson Architects, Mentougou is the brainchild of Finnish designer Eero Paloheimo. Scheduled for completion by 2020, the imagined city will have floating geodesic domes and solar panels dotting the hillsides, hiding the scars of former strip mines. Nestled in the valley will be nine research institutes, each devoted to some aspect of the city’s sustainability, whether water treatment, traffic, or geothermal energy. Mentougou’s 50,000 residents will double as the subjects in a larger experiment–“the idea was to develop the perfect ecological city,” says Eriksson founder Patrick Eriksson, “which may be a utopia, but the closer we get it, the better it will be.” Its creators will settle for carbon emissions a third of those normally produced by a city its size.

On the far side of Beijing, the city of Langfang,  has hired the architects of international firm HOK and Australia’s Woods Bagot to retrofit it as an “eco-smart city” using a technique known as “biomimicry.” First settled 4,000 years ago, Langfang (population: 800,000) is caught between the converging megalopolises of Beijing and Tianjin. But it could be “the Sonoma of Beijing” according to Janine Benyus, a co-founder of the Montana-based Biomimicry Guild, which is also involved in creating Langfang 2.0. Benyus’ plan would create canals running throughout the city and a skyline mimicking the triple canopy of an old-growth forest, using hardwood veneers on buildings and fresh plantings of trees and ginseng below. “Langfang didn’t have a elegant entrance to the city, so we created one – a patchwork of forest and wetlands,” Benyus says. Highways will be replaced by streetcars connected to the city’s dominant feature–a station on the new Beijing-Shanghai high-speed rail line threatening to subsume it into the capital’s anonymous suburbs.

China’s biggest-ticket green city lies further east on the outskirts of Tianjin, Beijing’s grittier answer to Newark or Long Beach. As its tongue-twisting name implies, Sino-Singapore Tianjin Eco-City,  is a joint venture between the two nations–an audacious effort to build the cleantech industry’s Silicon Valley, once again using an entire city as a laboratory. Slated to be larger than Pittsburgh or New Orleans on completion in 2020 (residents, mainly middle-class Chinese, are scheduled to begin moving in this year), the Eco-City will replace a brackish wasteland with a “Lifescape” and “Urbanscape” of terraced hills and high-rises, all comprised of swooping arabesques suggesting Zaha Hadid trying her hand at landscaping.

Like its nascent cousin Sino-Singapore Guangzhou Knowledge City,  (the planned home of 77,000 software developers due to open in 2015), the Eco-City’s actual goal is to write an instruction manual for bright, green cities any bureaucrat can follow. In Knowledge City’s case, this translates into an obsession with cities’ “software”–not the digital code humming beneath their screens, but the policies, practices, ways and means of building and managing one (assuming “quality of life” is something you can achieve by ticking the right boxes off a checklist.) Smart, green credentials aside, their purpose is help China’s cities look and feel a lot more like Singapore.

“Despite Singapore’s minuscule size, it’s the role model of the world’s largest state–China. And China’s not the only one,” says Parag Khanna, a senior research fellow at the New America Foundation and author of How to Run the World. “Every time diplomats from other cities travel to Singapore, they leave copying everything Singapore has done right,” whether it’s water, traffic or citizenship. “Many of Singapore’s ministries have set up consulting arms selling their own brands and services,” he adds. The city of the future, in other words, will be franchised.

The most ambitious instant city of all remains New Songdo, which aims to be the template for dozens to follow. Originally commissioned by Korea’s government to lure multinationals from Singapore and Hong Kong, Songdo is less of a Korean city than a Western one floating just offshore from Seoul. Eschewing the sci-fi trappings of Tianjin or Mentougou, Songdo’s architects at New York’s Kohn Pedersen Fox chose to cherry-pick the signatures of beloved cities and recycle them as building blocks. In practice, this means its streets and Central Park are modeled on Manhattan’s, its canal inspired by Venice, and its gardens borrowed from Savannah’s. (The golf course is courtesy of Jack Nicklaus.) This model has proved wildly popular with middle-class Koreans, who bought the first 1,600 apartments in a wild weekend scramble in May, 2005. Roughly a third of Songdo’s 65,000 envisioned residents now live there; the rest are expected to move in by 2017.

Songdo, too, is being touted as the greenest, most energy-efficient city in the world. All of its water and waste will be recycled and buildings will boast solar panels and sod on their roofs, specially glazed windows, and superefficient fixtures for efficient heating, cooling, and ventilation. It’s also meant to be “smart” in the sense that every square inch of the city will be wired with digital synapses–from the trunk lines running beneath the streets to the filaments branching through every wall and fixture. To what end? Stan Gale and his partners at Cisco Systems aren’t sure, but imagine if a city operated like an Apple iPhone–they would like to sell you the apps for everyday life.

Once again, it all comes back to the “software.” This is what Gale is referring to when he touts his city-in-a-box–a step-by-step guide to cloning Songdo using his architects’ plans and his partners’ products, run from the top down. Whether out of greed, prestige, or sheer necessity, instant city-builders of all stripes believe new cities should conform to Moore’s Law–faster, better, cheaper. Just as this mentality produced the high-speed rail crash that has shaken China’s faith in progress to its core, it has also produced a municipal debt bubble running into the trillions of dollars–nobody knows for sure. Will the desire to build the perfect city produce the perfect economic storm instead? “A major feature in all of these projects is that they start out with high hopes and goals, and then the money starts talking and we’re back to basics,” says Patrick Erkisson, one of the designers of Mentougou.

Even Songdo, which is widely perceived as the most successful of these instant cities, nearly sank under the weight of its financial burdens. “The third owner typically makes the profit on these projects,” says Gale, referring to the track records of mega-developments like Reston, Virginia, or The Woodlands, Texas. “I’m trying to buck that trend.”

Whether any of these projects will be as smart or as green as they promise remains to be seen, but their creators are convinced that the world needs a better model than the urban free-for-all of Shenzhen – “Less land, less energy, more recycling, and more reuse,” in the words of Ko Kheng Hwa, CEO of Singbridge, the Singaporean developers of Guangzhou Knowledge City. Building an instant city may sound crazy, but not as much as the alternative.

Travel + Leisure  |  October 2011

The Future of Travel

Horseless carriages. Mechanical flight. Digital mail: all once the stuff of imagination. T+L checks in with farsighted futurists to see what lies ahead.

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In 1970, the proto-futurist alvin toffler published Future Shock, adding information overload to the lexicon when he posited that the pace of change itself was speeding up. As proof, he pointed to our newfound tendency to stay in motion. In 1914, the average American traveled 88,560 miles in his lifetime. By Toffler’s day, many frequent fliers covered that in a single year. “Never in history has distance meant less,” he wrote. “We are breeding a new race of nomads.”

Toffler didn’t foresee the half of it. “In 2050, there will be nine to ten billion people on the planet, and one in two will travel abroad,” says Ian Yeoman, one of the many self-styled futurists who have followed in Toffler’s footsteps. “That is, if growth continues, and if the world has enough resources to support that growth.”

And therein lies the rub. To accurately predict the future of travel is to predict the future itself. No wonder the assignment was catnip for the futurists we reached out to. They envision a world that’s still recognizable from our own, notwithstanding fringe events such as the “gray-goo problem” (when microscopic machines run amok). Here are a few of the terms that may define travel in the years to come–assuming gray goo doesn’t swallow us first.

(Read the complete story at Travel + Leisure.)

The New York Times  |  September 2011

Not-So-Smart Cities


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THE Southwest is famously fertile territory for ghost towns. They didn’t start out depopulated, of course – which is what makes the latest addition to their rolls so strange. Starting next year, Pegasus Holdings, a Washington-based technology company, will build a medium-size town on 20 square miles of New Mexico desert, populated entirely by robots.

Scheduled to open in 2014, the Center for Innovation, Testing and Evaluation, as the town is officially known, will come complete with roads, buildings, water lines and power grids, enough to support 35,000 people – even though no one will ever live there. It will be a life-size laboratory for companies, universities and government agencies to test smart power grids, cyber security and intelligent traffic and surveillance systems – technologies commonly lumped together under the heading of “smart cities.”

The only humans present will be several hundred engineers and programmers huddled underground in a Disneyland-like warren of control rooms. They’ll be playing SimCity for real.

Since at least the 1960s, when New York’s Jane Jacobs took on the autocratic city planner Robert Moses, it’s been an article of faith that cities are immune to precisely this kind of objective, computation-driven analysis. Much like the weather, Ms. Jacobs said, cities are astoundingly complex systems, governed by feedback loops that are broadly understood yet impossible to replicate.

But Pegasus and others insist there’s now another way – that, armed with enough data and computing muscle, we can translate cities’ complexity into algorithms. Sensors automatically do the measuring for us, while software makes the complexity manageable.

“We think that sensor development has gotten to the point now where you can replicate human behavior,” said Robert H. Brumley, the managing director and co-founder of Pegasus. These days, he and others believe, even the unpredictable “human factor” is, given enough computing power, predictable. “You can build randomness in.”

Mr. Brumley isn’t alone in his faith that software can do a better job of replicating human behavior than the humans themselves. A start-up named Living PlanIT is busy building a smart city from scratch in Portugal, run by an “urban operating system” in which efficiency is all that matters: buildings are ruthlessly junked at the first signs of obsolescence, their architectural quality being beside the point.

To the folks at Living PlanIT and Pegasus, such programs are worth it because they let planners avoid the messiness of politics and human error. But that’s precisely why they are likely to fail.

Take the 1968 decision by New York Mayor John V. Lindsay to hire the RAND Corporation to streamline city management through computer models. It built models for the Fire Department to predict where fires were likely to break out, and to decrease response times when they did. But, as the author Joe Flood details in his book “The Fires,” thanks to faulty data and flawed assumptions – not a lack of processing power – the models recommended replacing busy fire companies across Brooklyn, Queens and the Bronx with much smaller ones.

What RAND could not predict was that, as a result, roughly 600,000 people in the poorest sections of the city would lose their homes to fire over the next decade. Given the amount of money and faith the city had put into its models, it’s no surprise that instead of admitting their flaws, city planners bent reality to fit their models – ignoring traffic conditions, fire companies’ battling multiple blazes and any outliers in their data.

The final straw was politics, the very thing the project was meant to avoid. RAND’s analysts recognized that wealthy neighborhoods would never stand for a loss of service, so they were placed off limits, forcing poor ones to compete among themselves for scarce resources. What was sold as a model of efficiency and a mirror to reality was crippled by the biases of its creators, and no supercomputer could correct for that.

Despite its superior computing power and life-size footprint, Pegasus’ project is hobbled by the equally false assumption that such smart cities are relevant outside the sterile conditions of a computer lab. There’s no reason to believe the technologies tested there will succeed in cities occupied by people instead of Sims.

The bias lurking behind every large-scale smart city is a belief that bottom-up complexity can be bottled and put to use for top-down ends – that a central agency, with the right computer program, could one day manage and even dictate the complex needs of an actual city.

Instead, the same lesson that New Yorkers learned so painfully in the 1960s and ’70s still applies: that the smartest cities are the ones that embrace openness, randomness and serendipity – everything that makes a city great.

Greg Lindsay is a visiting scholar at the Rudin Center for Transportation Policy and Management at New York University and the co-author of “Aerotropolis: The Way We’ll Live Next.”

World Policy Journal  |  Fall 2011

Thus Spake Nano

What if innovation itself is unsustainable?

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The Indian people’s car had finally arrived. Six years after Tata Motors chairman Ratan Tata announced his dream of building a “1-lakh,” or 100,000 rupee (roughly $2,230) car, the first Tata Nano rolled on stage in March 2009 accompanied by the fanfare from Richard Strauss’s Thus Spake Zarathustra. Ten-feet-long and egg-shaped, with a roomy interior but dinner-plate-sized wheels and a lawnmower engine, the Nano gets some 56 miles per gallon—on par with the electric hybrid Chevrolet Volt. And its emissions are considerably lower than the typical Indian motorbike or auto rickshaw, which both spew noxious black exhaust.

Tata’s rivals had repeatedly claimed it couldn’t be done. But his engineers discovered they could save room by putting the engine in the back, save money by sticking the battery beneath the seats, and save steel by using custom-made parts. It was more than just a cheaper car; it was a radical rethinking of how to build one. As innovations go, the Nano was arguably a greater achievement than the $40,000 Volt.

One observer who agreed with this assessment was C.K. Prahalad, the management guru touting “the fortune at the bottom of the pyramid”—the four billion strivers living on less than $2 per day. Don’t treat them as charity cases, he instructed readers in his books, but as consumers. Don’t dismiss them as too poor for your products; collaborate on creating new ones. Size up the constraints—price, performance, scale, resources—and then work within them, what he called the “innovation sandbox.”

This was the key, he argued, to unlocking the human potential of billions. “It is this approach to innovation—embracing constraints and leveraging them for breakthrough innovation—that got us the [Nano],” he wrote in an early celebration of the car, “in spite of the dramatic increases in the price of raw materials.”

Within that qualifier, however, lay a hint of innovation’s darker side, the never-ending rise in consumption in spite of—or rather, because of—breakthroughs like the Nano. The people’s car made mobility both more efficient and more accessible, threatening to vastly increase the number of vehicles on the roads—itself an unintended consequence.

Prahalad, who died last year, didn’t understand why environmentalists recoiled at the prospect of millions of Nanos added to India’s already-choked roads. “I think this is the wrong starting point for the debate,” he wrote, suggesting instead that the problems of burgeoning auto ownership might inspire their own breakthroughs.

But what if innovation is inherently unsustainable? The British economist William Stanley Jevons first diagnosed this dilemma in 1865’s The Coal Question, arguing that more efficient steam engines would drive down the cost to run them, thereby increasing coal consumption and eventually precipitating a crisis we would call “peak coal” today. Doing more with less is the essence of innovation, but the so-called “Jevons Paradox” means we do more with less—and then more.

This is what we call progress—a burst in productivity around a new innovation, trickling down as its costs fall and it achieves widespread adoption. We implicitly assume unsustainable consumption occurs at the top, not the bottom—in the form of a gas-guzzling SUV, not the Nano. But the Jevons Paradox suggests the opposite is true. If so Prahalad’s mantra that the biggest gains come in the smallest packages only threatens to make the problem worse.

UBIQUITY RISING

Around the same time the Nano hit showrooms, India experienced a cell phone boom. A glut of inexpensive Chinese-made handsets sparked a brutal price war among carriers, driving the cost of calls down to as little $.006 per minute. In 2006, India had 150 million subscribers, according to the Boston Consulting Group, but by the end of 2009, it had more than tripled to 507 million.

There is no question that cell phones have transformed the lives of India’s poor, quickly becoming an all-purpose device for work, banking, and even health care. This penetration suggests that cheap Chinese handsets could save billions of dollars (and carbon emissions) by rendering old infrastructure obsolete. They are also becoming most Indians’ gateway to the Internet, used for the familiar diversions of playing games, downloading music, and keeping tabs on social networks.

All of these functions live in “the cloud,” on the servers of Apple, Facebook, and Google, and each in turn is racing to build bigger, more efficient data centers supplied by cheap electricity, which typically means coal. Their aim isn’t to conserve energy but to plow their savings into the next generation of bandwidth- and power-hungry services. Greenpeace estimates the cloud already consumes more electricity annually than all of India and is poised to more than triple by 2020—an amount greater than the current combined demands of France, Germany, Canada, and Brazil.

In other words, the digital tools hailed by development experts as a means to reduce the environmental footprint of the “Next Billion” are poised instead to become one of the greatest sources of it. Another unintended consequence.

Jevons’ ghost lurks behind every innovation, whether it’s Moore’s Law—which drove down the price of microprocessors until they were effectively everywhere—or fuel economy regulations. Since 1975, when the United States first mandated Corporate Average Fuel Economy [CAFE] standards in the wake of the OPEC embargo, the number of miles traveled by vehicles has more than doubled.

Like music in the cloud, Americans chose not to pocket the miles-per-gallon they saved, but to consume more of them, leading to the vast exurban landscapes created after a pair of oil shocks and which now must be maintained by an even more efficient vehicle, the electric car.

Now that it’s India’s (and China’s) turn to drive, the International Energy Agency predicts that non-OECD countries will account for 93 percent of the growth in energy demand going forward. Meanwhile, the IEA’s top economist believes the world has already passed peak oil production.

Whatever happens, it won’t be the Nano’s fault. The “people’s car” is a dud, selling fewer than 10,000 per month, having been eclipsed by bigger and more expensive models from Suzuki sporting power windows and air conditioning. Still, the Nano might go down in history as the car that whetted poor Indians’ appetite for driving. “The bottom of the pyramid continues to be where the action is,” the editor of Autocar India told the New York Times. “But the aspirations of people are moving up.”

USER-CENTERED INNOVATION

Untangling the Jevons Paradox will require more than just technical accomplishments, or we will simply defer the problems of consumption into the future. “If we wait for market analysis to tell us what is sustainable, we will wait forever,” insists Roberto Verganti, a management professor at Politecnico di Milano and the author of Design Driven Innovation.

He is critical of what he calls “user-centered innovation,” the approach taken by Tata and multinationals such as Proctor & Gamble, which operates a simulated hutong—a typically Beijing alleyway—in its Beijing R&D center to observe the diaper-changing and tooth-brushing habits of its customers. “Radical change doesn’t come from users,” says Verganti. “Are there any other models for sustainable transport? Of course there are. But if you ask users, they will tell you they prefer to own a car.”

Radical innovations, Verganti suggests, require changing our very understandings of our objects of desire, which in turn depends on sensing or anticipating tectonic shifts in the larger culture. His paragons are companies like Apple, which dictate our desires rather than follow them.

But Apple’s success poses an even more troubling question. The iPhone and the iPad—both category killers—are the products of a seamless fusion of hardware and software, each developed in-house and optimized for the other. An unintended consequence is their non-replaceable batteries, which spurs many users to throw the devices out when the battery dies, not when the rest of their phone ceases to be functional. If Apple is the world’s most innovative and admired company, as many would suggest, then perhaps the logic of rapid, market-driven innovation itself is flawed.

“Finding sustainable solutions isn’t about discovering new, ever-more disruptive ideas,” argues Jens Martin Skibsted, founder of the Danish design firm Skibsted Ideation. “It requires the opposite, something very un-American: standardization, slowness, and centralization.” Standards are necessary for any cradle-to-cradle recycling scheme or other forms of infinitely replenishable consumption—but they are the enemy of competitive differentiation. Well-designed products may last longer, but the corporate obsession with speed-to-market has shortened their lifecycles to the point where a growing number are obsolete before they even hit the shelf.

It may prove impossible to decouple innovation from consumption. The alternatives proposed by Prahalad, Verganti, and Skibsted only sidestep the problem, assuming there will always be some future innovation to cope with unintended consequences. While this has produced a world in which seven billion people are living longer, healthier, and happier lives than at any point in human history, it also means we will forever be wriggling free of sustainability.

For its part, the Tata Group is following the world’s cheapest car with the world’s cheapest home. In July, the company announced it would begin selling a pre-fab, flat-pack 215 square foot house that can be assembled in a week, all for just 32,000 rupees ($720). The company hopes to sell them nationwide in early 2012, and the houses are designed to last only 20 years.

Advertising Age  |  September 2011

Ad Age Insights: The Evolution of Facebook Brand Fans

How and why users in six countries choose to interact with brands on Facebook

(From the Introduction. The complete report is available for $249 from AdAge.com.)

On July 6, Facebook CEO Mark Zuckerberg took the stage at company headquarters in Palo Alto, Calif., to make the “awesome announcement” that Facebook as we knew it was over. Just as users had experienced the heady rush of racing to replicate their offline relationships in the online world–the “social graph”–and before Facebook had even figured out what to do with them, the site itself had reached a crossroads.

“Social networking is at an inflection point now,” Zuckerberg said, noting the big theme used to be about connecting people. “That’s interesting,” he said, but “that chapter is more or less done at this point.We’re not everywhere yet, but there’s this clear arc where the world generally believes [social software] is going to be everywhere, whether it’s us or somebody else doing it.”

“Driving the narrative for next five years is … what kind of cool stuff and what kind of new social apps you’re going to build now that you have this kind of social infrastructure in place,” he said, not only referring to that day’s announcement of a videocalling linkup with Skype, but also to gaming, messaging, Facebook Places and other features designed to maximize user engagement through stickiness.

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This was all in line with has been called Zuckerberg’s Law– the tendency of Facebook users to share twice as much content as the year before. Zuckerberg’s message, in other words: Social media is ubiquitous, we’re all more or less connected, and now it’s about what we do with the social graph. And that’s where marketers come in.

But many have yet to turn the page on the evolution of Facebook into a highly sophisticated communication, engagement and, ultimately, customer relationship management (CRM) tool. They act like the site’s middle-aged users discovering the Pavlovian pleasures of the social graph, spending to acquire fans for their own sake. “When many brands started investing in Facebook, their only metric of success was fan growth, because it was the only thing they could understand,” said Sarah Hofstetter, senior VP-emerging media and brand strategy at 360i.

That has become an increasingly expensive proposition as the cost of advertising on Facebook has skyrocketed and the number of programs has exploded, leading to cutthroat competition for “likes.” Facebook took in $1.86 billion in worldwide advertising revenue in 2010, according to eMarketer, a 151% increase over the company’s estimated 2009 ad revenue of $740 million. Not surprising, a majority of that, $1.21 billion, was generated inside the United States. But by the end of next year, eMarketer expects Facebook’s ad revenue to triple to $5.74 billion–including an even split between domestic and overseas revenue.

For marketers, the question has become, what is the value of a fan? Back-of-the-envelope guesses have ranged from an average of $3.60 (according to a 2010 study by Vitrue, a social-media software provider) to a more reassuring $136.38 (according to Syncapse, a social-media software and services firm). But calculating fans’ value based on such metrics as product spending, brand loyalty and propensity to recommend raises questions of the nonfans because they suddenly like the brand, or were they always more loyal to begin with? And do they organically like the brand, or were they bribed with a promotion, a coupon or an early peek at the web’s next viral video?

There’s only one way to find out, and that is to ask them.

A new survey from DDB Paris, part of DDB Worldwide, and OpinionWay titled “Who Are the Brand Likers?” explores consumer motivations in becoming fans of brands. This is the second study of its kind, following a similar DDB Paris/OpinionWay study last fall, offering an in-depth look at the changing attitudes and habits of Facebook fans and users in the United States, United Kingdom and France–and shedding new light on fans in Germany, Turkey and Malaysia.

Open Skies  |  July 2011

Paradise Lost: The Death and Strange Afterlife of Brasilia

Brasilia was to be South America’s city of the future. Instead it was a disaster of epic proportions. Greg Lindsay reports on the painful birth and the slow death of the Brazilian capital.

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“Brasilia is artificial – as artificial as the world must have been when it was created,” wrote acclaimed Brazilian writer Clarice Lispector following a visit in 1962, after the new capital had just turned two years old. The instant city had risen from Brazil’s dry inland plateau in 41 feverish months, ahead of schedule in President Juscelino
Kubitschek’s campaign promise to deliver “50 years of progress in five.”

The postcard-ready edifices were in place by then – the flying saucers atop the National Congress, the concrete ribs of the Cathedral, the dainty colonnades of Itamaraty Palace – courtesy of architect Oscar Niemeyer, whose teacher, Lucio Costa, had designed the master plan. Costa did away with neighbourhoods and streets, replacing them with residential superblocks and superspeedways aligned along the Great Axis and Monumental Axis. The result was a city best seen from above, laid out in a pattern resembling a bird – or a plane. At ground level, the vast, windswept plazas swallowed people, crowds, and any semblance of street life.

“If they took my picture standing in Brasilia, only the landscape would appear,” Lispector imagined, awed by the inhuman scale of the place. “The two architects who planned Brasilia were not interested in creating something beautiful. That would be too simple; they created their own terror, and left that terror unexplained. Creation is not an understanding. It is a new mystery.”

The mystery confronting visitors 50 years later is why its creators ever thought Brasilia would succeed – not just in overturning 5,000 years of urbanism, but in Kubitschek’s aim of “a complete break with the past, a possibility to re-create the destiny of the country.” Made-to-order capitals were nothing new by 1956 – Washington D.C. was one – but in rejecting Brazil’s colonial heritage outright in favour of a utopian future, the president and his architects guaranteed their plans would be undone by messy reality.

(For the complete story, please download a PDF version here.)

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WSJ  |  May 2011

Marc Newson on How Design Is Easy and Why You Can’t Make a Cappuccino on a Plane

Newson, whose Lockheed Lounge achieved record-breaking sums at auction, speaks about his work for Qantas and how subtle changes can alter the way we go about our day

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Marc Newson is the rare industrial designer hailed as an artist, commanding prices to match. A prototype of his earliest, most famous work, the Lockheed Lounge–a swooping, aluminum-plated chaise–sold at auction last spring for $2.1 million. He followed that in the fall with an exhibition at New York’s Gagosian Gallery, the centerpiece of which was his refresh of the Aquariva, the iconic Italian wooden speedboat.

But the low-key, casually dressed Newson, 46, is more apt to describe himself as a “gun for hire” whose clients have ranged from Italian furniture makers to Nike, Ford and EADS, the parent of Airbus. He has designed glassware, shoes, champagne magnums, restaurants, cars, jets–even a spaceship–by applying his unique style of “biomorphism” to achieve organic forms through high-tech materials.

In 2006, the Sydney-born Newson was appointed creative director of Australia’s national airline, Qantas, becoming the highest-profile designer by far to grapple with the intractable demands of modern air travel. His most recent creation is a set of luggage tags with built-in radio frequency ID (RFID) chips, allowing passengers to track their bags anywhere, anytime. Considering how much time Newson spends aloft, it’s possible he designed them for himself.

–By Greg Lindsay

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I look at myself as a troubleshooter or a gun for hire. Most of the companies I work with are large corporations, whether it’s Qantas or Ford or Nike. They all have in-house design capability; it’s not as if they can’t do this stuff with their own resources. But for one reason or another they choose to go outside their typical way of thinking, because on some level they’re not capable of doing things in a different way. They’re not only looking for answers to questions they’re having trouble with, they’re also having difficulty expressing the questions. That’s where I come in.

It’s a matter of demystifying the issues, and trying to give things a handle to grab on to. I look for simple things–the straightforward parameters of a project–and once I’ve digested that and created the framework within which to work, it’s joining the dots, really.

I have to make it rational, because I’m working with such a broad range of industries–whether it’s designing a boat for Riva, or a camera, or a mobile phone–that I’ve got to look for logic somewhere. More often than not it’s a very straightforward and methodical process, so much so I find myself scratching my head, thinking, “You know, that wasn’t that hard, was it? I wonder why you couldn’t have done it by yourselves.”

Qantas is certainly the company that I have the longest relationship with, and for a designer like me, it’s very unusual. Having come from a background of designing furniture, it would have been a natural progression to simply design more and more exquisite furniture. And at a certain point I thought, “Well, God–does the world really need that much more expensive furniture when people are sitting in these chairs for hours on these planes, especially from somewhere like Australia, where a lot of the flights are long-haul?” It just seemed like a more worthwhile way to spend one’s time. (That’s not to say I don’t still design expensive furniture.)

When I started to develop a strong interest in technology and materials and how things are made, it became very clear to me that a lot of those things really originated in the aerospace industry–in some cases, in the military. So it seemed logical that if I wanted to learn about these things, going to the source would be a great way to do that.

Working with an airline is like working with a country. The politics, the bureaucratic issues–not to mention health and safety–there are huge challenges on every level, really. Just being able to track your bag at any moment during your trip–so much about the aviation industry is lacking. In some ways, it’s inherently technologically driven, and in many others it’s retarded. Things are so slow, so expensive and so mystified. Aviation is a touchy-feely industry–the interface between the airline and the customer is still very traditional. For it to work well, it needs to be very personal.

I designed a range of luggage for Samsonite almost 10 years ago, and we thought then, “Wow, wouldn’t it be great to be able to embed something in this piece of luggage that would let you know where it was at any moment?” Ten years later, with the RFID chip, the technology is mature.

So embedding that into a luggage tag seemed like a no-brainer. It offered the opportunity to redesign something as inane as a luggage tag to the point where you think, “Maybe people would actually like to have this on their bag, because it looks really, really cool.” That led us to create a physical object people were proud to have on their bag. That’s what all airlines are trying to achieve, but they’re all doing it in the same way, with their silly little cards that you hang on dopey fake leather straps. And as a designer you think, “This is just crying out to be done!”

People have tried over the years to automate the baggage process, and given the amount of technology that exists in the world, it should be possible. And it seems crazy not to be able to apply some of it to a worthwhile kind of vehicle like that industry. I’m amazed how unautomated it is on so many levels. A lot of that’s obviously driven by security. But there are huge opportunities.

They still can’t make cappuccinos on an airplane. A little machine that you could buy for a couple hundred dollars at Wal-Mart on an airplane costs $20,000, because it has to get certified to go above a certain altitude. It’s just one of those things that no one has kind of managed to do for some stupid reason.

I’m not a big fan of short, hour- or two-hour-long flights. From a very early age, Australians learn to fly. You have to travel long distances to get from one place to another, and I remember my first flight and being very excited.

There is something very interesting about altitude; I find that it provides a really unique environment in which to reflect on things. It’s wonderful to sensorially deprive yourself and be forced to really focus.

There are a number of people who do things the way I do. We attack a problem, we solve it, and more often than not, that’s it. The collaboration comes to end–not because we don’t enjoy each other’s company, but it’s just the way that I work. One of the downsides is that it’s difficult to build momentum with people. Every time I start work with a new company, I have to develop new relationships with people, and after you’ve built all of that goodwill the job is finished and you move on to the next client.

I look at the work of a great friend of mine, Jonathan Ive at Apple, and it’s taken at least a decade to get to where they are, honing their methodology. That’s something I really envy, in a way, but it’s not compatible with how I do things. I’m quite proud of the fact that I control my own destiny. I don’t have to attend board meetings, as I’m sure my poor friend Jony does very often.

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WSJ  |  February 2011

Cities of the Sky

From Dubai to Chongqing to Honduras, the Silk Road of the future is taking shape in urban developments based on airport hubs. Welcome to the world of the 'aerotropolis.'

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To arrive at midnight at Terminal 3 of Dubai International Airport, as I did recently, is to glimpse the pulsing, non-stop flow of the new global economy. The airport, which runs full-tilt 24/7, is packed at all hours. Nigerian traders bound for Guangzhou mix with Chinese laborers needed in Khartoum, Indian merchants headed to clinch a deal in Nairobi, and United Nations staff en route to Kabul.

Dubai’s recent financial woes have forced the tiny Gulf state to scrap or scale back some of its more outlandish development schemes, including The World, an artificial archipelago shaped roughly like a world map. But one project has not flagged: the new concourse for Terminal 3. With construction continuing around the clock, the annex to what is already the world’s largest building is desperately needed to accommodate the fleet of 90 Airbus A380s ordered by Emirates, Dubai’s government-owned airline.

Lighting a cigarette in his modest airport office during a meeting two weeks ago, Sheikh Ahmed bin Saeed al-Maktoum, the chairman of Emirates, laughed as he recalled the widespread doubts that Emirates could pay for–and fill–its superjumbo jets. But it can, and it has, and despite the downturn, Dubai has stuck to its plans to develop the world’s largest airline from the world’s busiest hub. In public statements, Sheikh Ahmed has equated the future of Dubai with the future of Emirates, calling his country’s mammoth airport the center of a new Silk Road connecting China to the Middle East, India and Africa.

Thanks to the jet engine, Dubai has been able to transform itself from a backwater into a perfectly positioned hub for half of the planet’s population. It now has more in common with Hong Kong, Singapore and Bangalore than with Saudi Arabia next door. It is a textbook example of an aerotropolis, which can be narrowly defined as a city planned around its airport or, more broadly, as a city less connected to its land-bound neighbors than to its peers thousands of miles away. The ideal aerotropolis is an amalgam of made-to-order office parks, convention hotels, cargo complexes and even factories, which in some cases line the runways. It is a pure node in a global network whose fast-moving packets are people and goods instead of data. And it is the future of the global city.

This may come as a surprise to Americans, many of whom have had it with both flying and globalization and would prefer a life that’s slower and more local. In the wake of the financial crisis, the bywords for the future have often been caution and sustainability. But there is no resisting the relentless, ongoing expansion of the world economy, and the aerotropolis–fast, efficient, far-reaching and filled with generic “world-class” architecture–embodies it. In places like Dubai, China, India and parts of Africa, cities are being built from scratch around air travel, the better to plug into the global trade lanes overhead.

At present more than half of humanity lives in cities. The percentage is higher in the developed world–four in five Americans live in downtowns or suburbia. China’s rate is half that, and India has not yet begun to urbanize in a serious way, with only 29% of its people in cities. Between now and 2030, the McKinsey Global Institute estimates, India must build a new Chicago every year to absorb the millions of villagers streaming from the countryside in search of work. While the number of city dwellers world-wide will nearly double in 40 years to more than six billion people, the size of cities’ footprints is expected to increase twice as fast.

This hasn’t been lost on Paul Romer, the Stanford University economist overseeing the development of an instant city in Honduras. He proposes building “charter cities” in impoverished states with new laws, new infrastructure and foreign investors–free trade zones elevated to the realm of social experiment. Mr. Romer sold Honduran President Porfirio Lobo on the idea in November and has stayed on as an adviser. Last month, the Honduran Congress voted to amend the country’s constitution to allow the pilot project to proceed.

In making his case to the Honduran public, Mr. Romer pitched the city as an aerotropolis. “Honduras could be the hub that brings Central America and Latin America into the world-wide network of air traffic,” he wrote. “Central America will eventually have a major hub. It’s a question of where, not if.” Without air connections to the outside world, his charter city will stagnate. “If you’re going to take the next step from assembling garments to assembling iPads,” he told me, “you’ve got to have a major airport, or you’ll never beat Shenzhen.”

Every aerotropolis is locked in competition with every other one, just as every financial center is jostling for position in the new multi-polar international order. The principle is the same: Everyone wants to be the hub; no one wants to be the spokes. This has made the aerotropolis ripe for experimentation when it comes to governance, whether it’s simple tax-free zones, the charter cities Mr. Romer proposes, or the “state capitalism” practiced by Dubai or Singapore. (The word “aerotropolis,” I should note, was coined by John Kasarda, a business professor at the University of North Carolina and my co-author on the forthcoming book of that title. He is currently working on projects in Indianapolis, Milwaukee and Panama, and has served as a consultant in the past in Detroit, Memphis, Tenn., Dubai, Chongqing and Hyderabad.)

The basic aim of an aerotropolis is to disrupt local incumbents and monopolies using the long arm of air travel. It allows Indian hospitals to entice American heart patients for top-notch surgery at rock-bottom prices. It lets factories move out to the far reaches of western China to manufacture the iPad for lower wages while absorbing millions of urban migrants. Detroit’s leaders are even building an aerotropolis in a Hail Mary bid for Chinese investment.

Floating above it all, meanwhile, are the globe-trotting executives chasing emerging markets. They are the denizens not only of Dubai and Singapore but of new business districts such as the Zuidas on the southern edge of Amsterdam, which was designed to be eight minutes from the airport by train and is home to the Netherlands’ biggest financial service firms.

The aerotropolis is the city that state capitalism built. In Dubai, Emirates is a wholly owned subsidiary of “Dubai Inc.” An uncle of the country’s ruler, Sheikh Ahmed is not only chairman of Emirates airline; he also oversees the airports, the civil aviation authority and the Supreme Fiscal Committee. From its beginning 25 years ago, the airline was seen as a strategic arm of the state, paying no taxes while importing the foreign labor that built the place.

Using its airline, Dubai feverishly assembled a population from elsewhere–Indian entrepreneurs, British bankers, Russians buying condos with suitcases of cash–thus creating the ethnic enclaves and gated communities that define the place. Americans outsource low-cost production to Chinese workers; in Dubai that labor (and the inequality it creates) is in-sourced. Emirates proved to be the enabler for Dubai Inc.‘s competing developers, who wildly overbuilt at their ruler’s behest.

Determined to prevent the world from connecting through Dubai, its oil-rich neighbor Abu Dhabi eventually followed suit, starting its own airline by royal decree in 2003 and eventually supplying it with $51 billion worth of aircraft. That was the precursor to its plan to lure franchise branches of the Guggenheim Museum, the Louvre and New York University, along with an entirely new section of the city in which to put them. Qatar’s rulers have done much the same in Doha, bulking up Qatar Airways and building a new airport ahead of its winning bid for the 2022 FIFA World Cup.

For its part, Saudi Arabia has gone so far as to build six “economic cities” from scratch in the empty desert. The aim is to house and create work for one-third of the 13 million Saudis under the age of 20–a largely uneducated work force. Each of these cities in the middle of nowhere will have its own air hub to recruit foreign investment. Like Mr. Romer’s instant city, they are social experiments, filled with California-style communities where men and women, foreigners and Saudis will mix.

The ultimate state capitalist and player in this game is, of course, China. For all the attention paid to its high-speed railways, the Chinese state is spending as much if not more to build 100 new airports by 2020, with new cities to match.

In the western city of Chongqing, huge swaths of countryside have been paved in preparation for the arrival of China’s electronics manufacturers, which are pulling up stakes along the coast. Led by Hewlett-Packard and Foxconn, the maker of Apple’s iPhones and iPads, Chongqing aspires to produce nearly half the world’s laptops by 2015, all of which will leave the city by air.

As a matter of policy, this strategy is a response to the millions of peasants leaving their farms for the city in search of work. China is building aerotropolises as a means to funnel growth away from the coast. It’s even building them in strategic spots as far away as Angola, Zambia, Sudan and Pakistan in order to airlift the labor required for extracting natural resources.

The aerotropolis is also attracting private developers. In India, where the government hopes to fund a half trillion dollars’ worth of infrastructure with public-private partnerships, airports are at the top of most companies’ wish lists. GMR, one of India’s largest industrial conglomerates, built a new airport in Hyderabad and a new international terminal in Delhi in exchange for land to develop around both. A private consortium–including the government of Singapore–is building new airports and cities near Ludhiana and Durgapur, in an attempt to create India’s answers to the FedEx and UPS cargo hubs in Memphis and Louisville, Ky. Not so long ago, those cities were Southern Rust Belt towns. They have been saved by companies like Amazon and Zappos, which set up shop around the air hubs in exchange for vast swaths of land on which to locate their mammoth warehouses.

Outside Seoul in South Korea, Songdo International Business District bills itself as the world’s smartest, greenest city and the most expensive privately financed real-estate project in history, with a price tag of $35 billion. It was originally commissioned by South Korea’s government to be a magnet for attracting foreign direct investment. The American developer Stan Gale was hired to a build an instant city the size of downtown Boston on a man-made island connected to Seoul’s airport via a 13-mile-long bridge.

What was imagined as a hub for Western expatriates–not a Korean city, but a mini-Manhattan floating off the coast of South Korea, complete with a “Central Park”–has been settled instead by families from Seoul. The city won’t be finished until 2015, at the earliest, but Mr. Gale is convinced that he’s “cracked the code” of urbanism and aims to sell 20 more just like it to mayors across China. Chongqing and Changsha have already expressed an interest.

The aerotropolis arrives at a moment when urban centers seemingly have started to rule the world. Just 100 cities account for nearly one-third of the global economy. “If the 20th century was the era of nations,” South Korean President Lee Myung-bak pronounced at New Songdo’s christening in 2009, “the 21st century is the era of cities.”

In places like China, India, and Dubai, the aerotropolis is the strategy being adopted to challenge the existing economic and political order. Rather than “machines for living” (in Le Corbusier’s famously bloodless formulation), these cities are competitive engines, designed to lure talent and investment or simply to park a growing and restive population. The recent uprisings in the Middle East have driven home the need to create housing and jobs at all costs.

These fast-growing air-based cities are already shaking things up. Emirates’ rise in Dubai has set off alarms in London, Paris and Frankfurt, where the chief executives of flagship air carriers worry that they are being cut out of new trade flows. Canada even triggered a nasty diplomatic spat with the United Arab Emirates over its refusal to let Emirates fly to Calgary and Vancouver.

The aerotropolis is tailor-made for today’s world, in which no nation reliably dominates and every nation must fight for its place in the global economy. It is at once a new model of urbanism and the newest weapon in the widening competition for wealth and security.

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The World in Flight

2.4 billion
Air travelers in 2010

3.3 billion
Projected air travelers in 2014

9.4%
Projected average annual growth in international passenger demand in the Middle East, 2010-2014

4.9%
Projected average annual growth in international passenger demand in North America, 2010-14

31 million
Metric tons of international cargo traffic in 2010

38 million
Projected metric tons of international cargo traffic in 201

The New York Times  |  February 2011

Reach for the Skies


IN his State of the Union speech last week, President Obama talked about why things like high-speed rail and faster Internet connections were critical to American prosperity. But he left out the fastest, safest mode of transportation available: aviation.

It may be hard to imagine flying as anything other than a nightmare of packed planes, crumbling airports, canceled flights and increasingly invasive security. But these are all signs of how far our system has fallen. In fact, of all the transportation options available, aviation is the one with the greatest potential to improve the economy and Americans’ well-being – though it will take major new investments to get there.

From 1975 to 2005, while global gross domestic product rose 154 percent and world trade grew 355 percent, the value of air cargo climbed 1,395 percent. Today, more than one-third of all goods by value, some $3 trillion, is carried in the bellies of planes. These goods are the high-tech, high-value products that Americans want to make – clean-energy technology, electronics and biomedical devices – and they are key to the president’s goals of doubling exports and revitalizing our economy.

What’s more, air travel remains ever more vital to American workers. The transportation analysts Kenneth Button and Roger Stough found that the presence of an airline hub in a city increased the local high-tech work force by an average of 12,000. Another study concluded that each flight from Los Angeles to Europe or Asia created 3,126 jobs, totaling $156 million in wages.

True, there’s always telecommuting. But high-speed Internet hasn’t diminished the need for highly skilled workers to fly, because meeting face-to-face matters more than ever when the products are ideas and the employees are spread across international borders.

Of course, some analysts predict that a return to $140-a-barrel oil would put a crimp on the airline industry, if not ground it altogether. But aviation growth doesn’t correlate to rising oil prices. Rather, it’s about expanding economies: oil prices have tripled in nominal terms since the start of the Iraq war, yet the annual number of passengers worldwide has risen 43 percent since 2003. In the global economy, speed trumps costs.

The problem is that aviation in America is slowing down. For decades, even as demand grew, we failed to expand runways, upgrade technology and build larger terminals. New York‘s three airports, which suffer some of the worst delays in the country, cost travelers $1.7 billion annually in lost time alone. Similar stories abound across the country.

America may not see the advantage to such investments, but China and India do. Both are experiencing annual aviation growth rates as high as 20 percent as their growing middle classes take to the skies. And they are building hundreds of new airports to connect their once-obscure, now-booming cities to each other and their neighbors, not to us.

Indeed, the rest of the world is interacting via air like never before. The number of visitors to China from the Middle East, Africa and Latin America quintupled from 2000 to 2007; not coincidentally, China’s exports to the Arab world soared to $60 billion from $6 billion. America is, in other words, getting cut out.

We need to do three things to improve air travel and forge new links overseas.
The first step is to upgrade our air-traffic-control system, which dates back to the 1930s. The government must finally switch from radar to the G.P.S.-based system known as NextGen, which lets planes fly via satellite signal instead of following radar beacons, saving time and fuel, which in turn increases airport capacity.

According to Alaska Airlines, which demonstrated the technology last year at its Seattle hub, a G.P.S.-enabled system could save 2.1 million gallons of fuel at an airport annually and cut carbon emissions by 35 percent.

We also need to treat our airports as strategic federal investments, rather than local spending efforts. O’Hare International Airport, for decades the largest in the world, is a primary reason that today Chicago has a higher G.D.P. than South Africa. But O’Hare, like many American airports, desperately needs more and longer runways. Unfortunately, there is not enough federal commitment to ensure they are built, leading to time-consuming political and legal battles. Earlier this month United and American Airlines sued Chicago to stop a $3.4 billion expansion at O’Hare, fearful they would be stuck with some of the bill.

So far, though, we’ve made only tentative steps in the right direction. Last fall President Obama pledged to repair 150 miles of runways around the country. He must follow through on that, but he must also ensure that aviation receives its fair share from the proposed national investment bank.

Finally, to help protect airlines from oil price spikes (and potentially crushing carbon taxes later on), we need to make investments in high-grade biofuels. The technology exists – a California company called Solazyme has already sold jet fuel refined from algae to the Navy – but low-cost, high-volume production does not. As in other areas of green technology, federal involvement is critical to get the market moving.

President Obama is absolutely correct when he says that exports are vital to American prosperity. But without significant new investments, the exports of the future – from innovative ideas to high-end electronics – will be left sitting at the departure gate.

Greg Lindsay is a co-author of the forthcoming “Aerotropolis: The Way We’ll Live Next.”

 

Advertising Age  |  November 2010

Ad Age Insights: Global Media Habits 2010

How media is consumed around the world — from mature markets where traditional media use is shrinking to emerging ones eagerly embracing old and new alike.

(From the Introduction. The complete report is available for $249 from AdAge.com.)

The first thing you should know is that the name of this report is the Global Media Habits survey. While we’ve been obsessed with the carnage in the American and, to a lesser extent, European media markets, for the last couple of years the global media landscape has mirrored the broader economic one–which is to say, developed nations are fragmenting while developing ones are booming across the board. This is as true for television and newspapers (newspapers!) as it is for online video and mobile phones, the latter of which is poised to become the most ubiquitous media device in history.

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This bifurcation in media reflects another in the world at large. Not just marketers, but governments (e.g., in Britain, France, Greece, etc.) are slashing budgets and announcing austerity measures while ministers in New Delhi and Beijing (not to mention their corporate counterparts in Mumbai and Shanghai) are calling for massive increases in spending to reach a middle-class consumer who literally did not exist 20, 10 or even five years ago.

In a country like India, for example, two middle classes actually co-exist–a prosperous middle class by any measure (with an average income between that of the typical Brazilian and Italian) and an emerging middle class earning anywhere between $10 and $100 a day per person. The group making up that middle class accounted for one-third of the world’s population in 1990, but 57% by 2006, according to Indian economist Surjit Bhalla. That growth hasn’t been linear. If one graphs the average income of the world’s consumers, the middle earners comprise a large bell curve, while the top 1% and “bottom billion” form long tails on either side. That bell curve is moving en masse into the emerging middle class, creating a media boom in the unlikeliest of places….

Fast Company  |  December/January 2010

The Radio Shack of Renewables

Power Player: Interstate CEO Carlos Sepulveda dominates today's battery business while he preps for tomorrow's. Photograph by Darren Braun

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It’s a rechargeable world. Between tablets, electric cars, and the ubiquity of cell phones, batteries threaten to supplant paper, oil, and copper wire. The worldwide market is expected to grow from $36 billion in 2008 to $51 billion by 2013—and nearly $10 billion in the United States alone.

Upstarts such as Better Place and BYD envision swapping gas stations for recharging ones. They have the technology but lack retail channels and distribution. And building your own is expensive. Better Place estimates doing so will cost $150 million per region. Which is why the linchpin of a rechargeable revolution may turn out to be a Dallas company with stronger ties to Nascar than green cars.

Interstate Batteries started selling its namesake product 60 years ago out of the back of its founder’s Studebaker truck. Today, the privately owned $1.4 billion company is America’s largest distributor of lead acid batteries (think: car), selling 15 million a year. It silently manages the private-label replacement batteries for 20 of the world’s 24 largest automakers, including Toyota. So while battery makers such as LG Chem, A123 Systems, NEC, and Johnson Controls are racing to perfect lithium-ion varieties, it will likely fall to Interstate to service, replace, and recycle most of them. (It already recycles more than a billion pounds of batteries annually.) “Right now, it’s a highly fragmented market,” says CEO Carlos Sepulveda, “but we’re everywhere.”

And coming soon to the strip mall near you. Interstate’s All Battery Centers promise “every battery for every need” and come close, with solutions ranging from iPads to yachts. Since acquiring the first stores more than a decade ago, Interstate has opened 153 additional stores, although Sepulveda says he could eventually add up to 1,000 across the country. (This year, he’ll open 40.)

As batteries become the common denominator of how we transport, express, and entertain ourselves, Sepulveda can see his chain staking a claim as the RadioShack of renewables. “If it’s solar panels, we can have relationships with manufacturers for parts, for warranties, and for servicing,” he says. “We can do the same thing for hybrid vehicles.” Interstate has talked to Toyota and other hybrid manufacturers about building a new distribution and recycling system. By planting its flag as the retailer of power, Interstate could fill the missing link between battery lab and living room or driveway. “Whichever way this market goes,” Sepulveda says, “we don’t have to fight it.”

A version of this article appears in the December / January issue of Fast Company.

Fast Company  |  November 2010

The Master Plan: After The Expo


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(Originally published at FastCompany.com on November 1st, 2010.)

The future belongs to crowds. That’s the lesson in a sentence from Expo 2010, which concluded in Shanghai on Sunday after six months, a record-breaking 73 million visitors, and 30,000 newborns saddled with the unfortunate name of “Shibo” (Chinese for “Expo”). Estimates for the cost of the World’s Fair—the largest and most expensive in history—run as high $58 billion, depending on how Shanghai’s infrastructure upgrades are accounted for.

Visiting the Expo could be a grueling experience. Roughly the size of Central Park, the fairground could accommodate 600,000 people. But daily attendance peaked in late October at 1 million, creating a park both vast and massively overcrowded. Locals warning visitors “If you don’t go you’ll regret it; if you do you’ll regret it twice as much,” were specifically warning of the epic lines, which in the Expo’s final days took anywhere from five to 11 hours to get through at the most popular pavilions. (At one point Turkey sparked a minor incident by accusing Saudi Arabia and Germany of padding their waits for prestige.)

Chinese officials guaranteed they would shatter the record set by Osaka in 1970 by giving away millions of free tickets and subsidizing numerous tours. For many visitors, the most popular souvenir wasn’t some tchotchke featuring the Expo’s ubiquitous blue mascot, Haibao, but the folding plastic stools hawked outside the gates.

The Expo’s stated theme was “Better City, Better Life,” and organizers boasted it was the first World’s Fair devoted to the contemplation of cities. Its finale Sunday included a “Shanghai Declaration” signed by all participants advocating for greener, more sustainable, and more equitable ones. “We have come to realize that people’s understanding and pursuit of a better life are both the foundations and the engines of urban development,” the official English translation stated. “We are also convinced that it is necessary to re-examine the relationship between people, cities and our planet. We agree that, in tackling the challenges of urban development, innovation offers solutions and the concept of ‘Cities of Harmony’ embodies our dreams.”

“Cities of Harmony” echoes the “harmonious society” envisioned by Chinese president Hu Jintao as the outcome of his “scientific development” policy established in 2005. As the Expo’s chairman put it, “I think the key is now to solve the problems that have been brought about by development through development. The priority is development.”

And the top priority of the Expo was to sell 70 million Chinese attendees—many of who were visiting Shanghai for the first time from the countryside—on the urgency of deserting their farms for cities. McKinsey expects China’s urban population to rise by 350 million in the next 15 years, of whom 240 million will be internal emigrants. Sheltering them will require 5 million new buildings and as many as 50,000 skyscrapers, thereby underwriting both China’s real estate bubble and its torrid rate of GDP growth.

As popular as Saudi Arabia’s and Germany’s were, the real message of the Expo was embodied by its Theme pavilions, which offered fair-goers a crash course on the past, present, and future of cities. In one, attendees posed for photographs with a wax effigy of a family of four from exurban Phoenix, who were depicted with a shopping cart overflowing with groceries (top, below). Another reprinted lines from last December’s Copenhagen Accord to underscore the threat of climate change. (Never mind that the Oil pavilion sponsored by CNPC, Sinopec and CNOOC featured a mascot named “Oil Baby.” “Oil represents oil and gas, while baby means growth and hope.”)

And in yet another, Chinese visitors were introduced to Le Corbusier, whose plans to knock down the entire Marais district in Paris and replace it with rows of identical towers have more or less been executed in Shanghai. In the Expo’s telling, Corbu “always designed cities as beautiful as possible, ‘with enthusiasm, with faith in love and beauty…’ Regrettably, his works were not sufficiently appreciated by his contemporaries.”

Not so in contemporary China, where the Expo’s task was to put a smiling face on the rationale for forced demolitions followed by breakneck construction. A more honest defense of the former appeared in the press a few weeks before the fair’s closing, after a standoff in the Jiangxi province southwest of Shanghai pitting nearly 200 government workers against a family fighting to preserve their home from demolition ended with the family lighting themselves on fire. In response to the resulting outrage, a local government official wrote an open letter to Caixin arguing the furor obscured some inconvenient truths:

When so many are denouncing the forced demolition policy, it seems that we all ignore a basic fact—everyone is the beneficiary of forced demolition policies. When you are living in a spacious and comfortable house, when you are walking on the street, when reporters are writing articles condemning forced demolition policies in luxurious hotels, can you imagine that the land under your feet was once obtained by the government by forced demolition? Therefore, to some degree, we won’t have urbanization without forced demolitions. And we won’t have a ‘brand new China’ without urbanization. From this point, I would add that there is no ‘new China’ without the forced demolition.

There would have certainly been no Expo without it. Building the fair required stripping the footprint clean of the shipyard and worker housing that once stood there, relocating 10,660 families in the process. In the coming months, local authorities will flatten the site again, as the first Expo devoted to sustainable urban development is destined to be landfill. From the Financial Times:

According to the rules of the Bureau International des Expositions, the global governing body of Expos, almost all of the 200-odd pavilions that covered the 5 sq km site must be taken down. But that creates a contradiction: that this greenest of Expos will inevitably create tonnes of waste by the simple fact of its destruction.

The Shanghai Expo’s own rules state each pavilion must be recycled, although no one knows how to go about this. (China’s own pavilion will survive as one of the fair’s few permanent structures.) Most, the newspaper notes, “will simply vanish—leaving only prime real estate perfect for that most Shanghainese of sports: the construction of yet more luxury residential properties to be snapped up by speculators.”

Fast Company  |  August 2010

The Master Plan: A City in the Cloud


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(Originally published on FastCompany.com, August 23, 2010.)

When did Silicon Valley become so obsessed with building cities? Last month it was Cisco’s SVP of strategy Inder Sidhu describing the company’s smart city play as the $36 billion company’s “biggest opportunity.” Then, at the inaugural Techonomy conference a few weeks ago, an all-star roster of techies, VCs, and scientists pondered “cities as solutions.”

Physicist and former Sante Fe Institute president Geoffrey West practically stole the show with his talk on urban metabolisms. Cities are like organisms, he explained, except they grow much faster and much bigger than anything living – in fact, there appears to be no upper limit to their size or propensity for innovation… or disaster. “Urbanization is the problem,” he said, “and it can also be the solution.”

These being Silicon Valley types, it was clear what that solution should be. “Copying 20th century cities in Dubai and Shanghai is crazy,” said former Sony chairman Nobuyuki Idei in yet another session. “We need… a city OS” – a single platform managing power, water, traffic, security and any other urban system you can think of.

Rest assured, Mr. Chairman, someone is working on it. But it isn’t Cisco, IBM, HP, Microsoft, or any other tech heavyweight. In fact, in the course of reporting my story on New Songdo City last fall, representatives of each company pooh-poohed the idea of a purpose-built urban operating system. They believed one would emerge eventually, albeit as the result of a messy convergence of competing standards – you know, the way things work in the real world. Leave it to a five-year-old start-up few people heard of to challenge that notion and to build its own smart city from scratch in the hills of Portugal near Porto – “PlanIT Valley.”

Living PlanIT (pronounced “planet”) is the brainchild of Steve Lewis and Malcolm Hutchinson, a pair of IT veterans who met when Lewis was still a top executive on the .NET team at Microsoft. Their ambition is twofold: to build a prototype smart, green city in Portugal that can be rolled out worldwide, and to drag the construction industry into the 21st century.

The latter may be the more audacious of the two. While plenty of companies have jumped on the smarter city bandwagon (as I’ve written about ad nauseum), no one has sought to make the construction business look more like the technology one.

“It’s a bit of a bloodbath really,” says Lewis, who began studying it while still at Microsoft. “They’re using techniques older than God. All of the technology is being used on the design end. No one can look into the future and ask ‘If I put better glass into this building, what does that do for energy efficiency down the road?’ You have developers building to do a quick flip, and eventually the building becomes so inefficient and so expensive to fix they have to knock it down. There’s no process and no lifecycle management. The industry is fragmented and the consolidation that’s happened everywhere else hasn’t happened here.”

A Harvard Business School case study (pdf) published earlier this year echoed this view. Despite being a $4.6 trillion global industry, construction firms have had little incentive to integrate, consolidate, or otherwise become more productive. While non-farming industries have made productivity gains averaging 80% since the 1960s, the construction industry has become 20% less productive over that span. “Studies suggested that up to 75% of construction activities typically added no value,” the authors noted.

This is astounding (although not at all surprising) considering buildings “accounted for nearly 40% of the total energy consumption in the United States, including 70% of the country’s electricity, and 38% of carbon emissions.” (Some estimates have put it as high as 50%.) Construction materials accounted for a whopping 60% of solid, non-industrial waste. “Most of it ends up in landfill,” Lewis says. “They either broke it or over-ordered it.”

His solution is simple – and overwhelmingly ambitious. First, streamline the process by applying the same lean manufacturing techniques and supply chain integration that’s been common in the automotive and aerospace industries for years. Lewis and his team have spent the last five years talking to Northop Grumman, Toyota, and Ford (among others) about “mass manufacturing and mass customization,” he says. “How do you get the aesthetics and variability right while at the same time keeping consistent quality?” He envisions construction companies which look more like the computing industry’s original design manufacturers (ODMs), building modular, plug-and-play components ordered from a catalog and slotted into a city’s Urban Operating System – both of which will be owned by Living PlanIT.

The second piece is to build an “ecosystem” of partners including Cisco, Accenture, the U.K. engineering firm Buro Happold, the project management software company Aconex, and McLaren Electronic Systems, which sells the onboard sensors for Formula One racing. Living PlanIT has signed or in talks with 300 such partners so far, and hopes to eventually sign 14,000. (Lewis says to look for the next batch of announcements in September).

Together, they’ll fill in the blanks in Living PlanIT’s plan to code cities like software – in which buildings, sensors, and traffic apps alike are connected through the cloud. All the company will own is the Urban OS – the glue in its urban fabric – and the process, from drafting blueprints to “decommissioning” an obsolete building like you would junk a server.

The company believes it’s the only way to achieve the efficiencies necessary to make a significant dent in cities’ carbon footprints. “Unless you’re thinking simultaneously about the technology, Urban OS, and the construction process, you’re going to end up with a sub-optimal solution,” argues Robert Eccles, the Harvard Business School professor who co-wrote the case study and has since joined its board.

Plus, it’s good business. “You create a platform, you license it to partners, they augment it, they drive it, and we pick up a royalty,” Lewis says. “We provide a software model to the entire industry,” and everyone’s profit margins soar. That’s the plan, anyway.

Because the difference between cities and software is that sooner or later, you have to compile your apps in atoms, not bits. Which brings us to “PlanIT Valley,” the $19 billion instant city outside Porto, Portugal. In 2008, the company began acquiring 1,670 acres, a footprint comparable to Korea’s New Songdo—which is in turn roughly the size of downtown Boston. Full build-out is scheduled for 2015, by which time PlanIT Valley should have a population of around 150,000 – nearly all of whom will work in R&D for Living PlanIT’s partners. (Cisco signed a deal to build a technology innovation center there in June.)

In other words, the city’s residents will experiment on themselves. “They don’t want a campus, they want a city,” Lewis says. “They need to send their kids to school; they need to be entertained. You end up with a brilliant R&D platform – you live in it, you improve it, you market it. If [a customer] says, ‘I want a medical clinic,’ we already have one. We backed into building PlanIT Valley based on customers’ demands.” It’s purely a prototype for the instant cities Living PlanIT hopes to sell in China and India – which need new ones by the hundreds, built faster and green and smarter than any city that’s come before. But first Lewis hopes to announce an urban infill project in a major European city this fall, and another in the U.S. within six months.

“What I find troubling as an academic and as a citizen of the world is whether enough innovation at this scale is going to happen to solve this problem, because it isn’t going away,” says Eccles. “The real problem is making sense of this market and learning how to finance it. We need to come up with a business model for doing this. To me, that’s their crown jewel – this completely fresh framing. It’s not, ‘build it, and will they come?’ It’s ‘Let’s give them reasons to come.’ No one has ever done that before and that is what Living PlanIT is trying to do.”

Not quite. Cisco signed a deal with the Kremlin earlier this summer to help create a purpose-built “Silicon Forest” outside Moscow, and New Songdo as it was originally conceived was designed as a laboratory for many of the same sensor technologies Living PlanIT intends to develop. In fact, the New America Foundation’s Parag Khanna touts Songdo as the template for future cities in the new issue of Foreign Policy.

But PlanIT Valley is the first city conceived by technologists, for technologists, in which the architecture and urban planning are all but beside the point. (“Architects are missing a big trick not thinking they need to be more engaged with the business and technology communities,” Eccles says. “The world is passing them by.”) And they’re hardly the first to apply the reigning technology paradigm of their day to urban planning. “We shall solve the City Problem,” Henry Ford once wrote, “by eliminating the City,” and succeeding in doing just that in Detroit.

In order to solve the world’s City Problem, Living PlanIT is betting, we must dematerialize the city, translate it to code, make perfect copies, and then scale it to whatever size we need. Soft City has become the Software City.

Surface  |  July 2010

The Surface Interview: What Moves Us

The new transport-themed issue of Surface includes an interview with me by editor-in-chief Dan Rubenstein, who found himself stranded in Milan the Icelandic volcano shut down European airspace in April. "I finally arrived home four days later," he writes in his editor's letter, "but the ordeal made me realize the fragility of modern life, especially when it comes to transportation and what to include in this first-ever Transport Issue. Capacity, flexibility, convenience: All these issues today are crucial." Indeed. Below is the interview. His questions are in bold; my responses follow.

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How are the emerging cities of today developing differently than those built during the age of rail and sail? The shape and design of any city isn’t defined in terms of distance, but time. It’s never been a question of how we’re willing to travel, but how quickly we can do it. The Italian physicist Cesare Marchetti offered a “one-hour rule” of human movement. When walking was our only option, cities were only six miles wide–just enough so you could walk from the edge to the center and back in an hour. This pattern is seen throughout in history, from ancient Athens to Los Angeles: the time we spend commuting has never changed, only our means of transportation has.

So what’s the state-of-the-art in transportation today? The Internet and the Boeing 747. Digitally, we can be everywhere at once, globally and locally, while air travel is our only means of actually moving on a global scale. But I think the reason there’s been a recent resurgence in traditional railroad cities like New York or Chicago or San Francisco (a port city) is because their most affluent inhabitants don’t have to move around as much locally. As members of the “creative class,” their work is done over the Internet. By and large, we no longer commute to factories.

China, on the other hand, is all about its factories. And because we still demand everything more or less overnight–witness everyone’s bellyaching over how long it took for their iPads to arrive–that means a lot of that stuff goes by air. China is in the midst of moving those factories to its western provinces, next to brand new airports. We’re committed to moving bits and they’re committed to shipping atoms.

If you want a glimpse of what the cities of the future might look like, you could do worse than New Songdo City, South Korea, an instant city under construction that’s the size of downtown Boston, with features borrowed from New York and other cities, all aimed at residents to drive nine miles to the airport to do business in China. It’s not something we’re used to seeing in the States.

Transport architecture is often used as a sign of growth or strength. Post-bubble, do you see this trend changing? The appetite for “iconic” architecture in the developing world appears to be endless. And if everything is “iconic,” then nothing is, Dubai being the perfect example. What Americans fail to realize about Dubai is that all of its neighbors have copied it. It’s less about national pride than “build it, and they will come.” They’re high-end tourist attractions. Abu Dhabi is building a Guggenheim branch by Frank Gehry, a Louvre by Jean Nouvel (in exchange for a $1 billion licensing fee), and another museum by Zaha Hadid. That’s on top of the NYU Abu Dhabi branch and the “zero-carbon” Masdar City. Why does it need all of this stuff? Because it saw how Dubai used spectacle to capture the world’s attention. And don’t forget that Dubai is a smaller than Columbus, Ohio.

Abu Dhabi is also spending tens of billions of dollars on its airport and national airline, Etihad, for a similar reason: to bring millions of people from around the world to a relative backwater. Beijing and Dubai didn’t build mega-terminals to impress people; they built because they need the space. We’re seeing places use a combination spectacle and transportation as weapons to make themselves famous and theoretically successful. Dubai built its airport before a school or a hospital.

What can we–who live in older cities like New York–can learn from the new ones? One of the underlying arguments in Aerotropolis is that we who live in older cities need to think hard about the tradeoffs between the urban fabric we love and pros¬perity. Sooner or later, there are consequences if you fail to fix the bones of your city; London’s Heathrow is the perfect example. Heathrow is slowly choking on its own congestion, hemorrhaging flights and con¬nections to the major airports on the Continent. Due of this, the Labour government wanted to build a third runway. Gordon Brown argued it was imperative to the city’s continued success as a financial center. His opponents disagreed, and the third runway is probably dead. What now? Well, the Conservatives want to build a high-speed rail network, which is great, except for the fact that if they put a train stop at Heathrow, traffic will likely go up, because it’ll be easier to catch a flight. And then what? Now that British Airways has merged with Spain’s national carrier Iberia, they plan to move connecting flights to Madrid, which means a lot of businesses might move there, at a time when the UK economy is stagnant. Do you want those jobs are not? Spain does. My point is that those of us who live in a New York or London can’t take it for granted that all we need is a Wi-Fi signal when it comes to infrastructure. We can choke on our own success, and someone is waiting to pick up the crown when we do. Are we willing to tear some things down and start over? Or, as the mayor of London has suggested, build a gigantic new airport in the Thames Estuary instead? There are no right answers.

Fast Company  |  June 2010

The Master Plan: Russia Hires Cisco To Plant A Silicon Forest

(Originally published on FastCompany.com on June 25, 2010)

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Russian president Dmitry Medvedev wrapped up his whirlwind tour of Silicon Valley yesterday, and while it’s fun to imagine Steve Jobs giving him the five-cent tour of One Infinite Loop or Ev Williams and Biz Stone teaching him how to tweet, Medvedev’s mission was to round up investors for Skolkovo, his attempt to clone a Russian Silicon Valley and diversify its economy away from oil and minerals.

He succeeded, wrangling a $1 billion, decade-long commitment from Cisco, including promises to make Skolkovo a “smarter city” (or “Smart+Connected Community” in Cisco parlance), creating a second headquarters for its emerging technologies group (based in Bangalore) and teaching Russian startups the ropes. This has become a Cisco specialty. I wrote back in February about its plans to build instant smart cities in China, India, South Korea and Saudi Arabia (pdf), all of which have charged the networking company with creating a culture in addition to laying infrastructure. Wim Elfrink, Cisco’s chief globalization officer, described its smarter city business to me as a $10 billion opportunity, not to mention the chance to up-selling heads-of-state.

This raises the question of whether it’s even possible to build a Silicon Valley from scratch. Many have tried; all have failed. In hindsight, the conditions that created the Valley are obvious, but may be unrepeatable: the presence of Stanford University; the creation of its neighboring research park; the founding of Fairchild Semiconductor and Hewlett Packard; the alumni networks which arose from these and other seminal companies; the Valley’s subsequent reinventions from microprocessors to PCs to Internet software, and the agglomeration economies which made it all possible. Cisco’s job is to help streamline this process and squeeze it into a decade or less.

“Through their practices and through their densities, Silicon Valley companies know how to get to the next great things.” Saskia Sassen explained to me last fall. Sassen is a professor of sociology at Columbia University and an expert on the intersection of cities and globalization. She argues Cisco and other smarter city-builders have been hired to recreate the circumstances of their birth. “They’ve extracted a product from that: smart cities. First you extract it, and then you commodify it.” “They originally tried it in Malaysia and Korea,” she added, “but they were not successful. The results were more like office parks. They were the opposite of the global, fast-moving, powerful cities they were meant to be.”

The list of failures is longer than that. The sociologists Manuel Castells and Peter Hall compiled a list of “technopoles” made in Silicon Valley’s image, including Japanese and Korean “science cities,” research parks in Cambridge, Seville, Adelaide and Boston’s Route 128 (which, while certainly successful, never mounted a serious challenge to Silicon Valley) and Russia’s Soviet-era effort to plant a “Silicon Forest”—Akademgorodok, aka “Academy Town.”

The brainchild of Nikita Khrushchev (sound familiar?) Akademgorodok was founded in 1957 on the shores of a man-made sea adjacent to Novosibirsk, the industrial capital of Siberia. The home of a new, elite university and institutes of the USSR Academy of Sciences, Akademgorodok boasted at its 1960s peak a population of 70,000 people, including 7,500 scientists, 3,500 students, and several thousand technicians and staff. But the failure to escape the long arms of the Communist Party and academic bureaucracies quickly eroded their enthusiasm. Scientists lured from Moscow and Leningrad moved back almost as quickly as they arrived, and the ones who stayed focused on basic research with few practical applications. From an urban planning standpoint, Akademgorodok wasn’t much better, with sharply delineated residential zones setting aside cottages for academics, “upper zone” zone apartment blocks for mid-level scientsists, and tenements for construction workers.

After the Wall fell, IBM and Intel moved in, leading then-prime minister Vladimir Putin to earmark $100 million in state funds for the construction of a $650 business park. “We simply mustn’t waste this chance,” he declared in 2005, following a trip to India. At the time, Fortune declared the city – you guessed it – “The next Silicon Valley.”

This time, the Russians themselves are more skeptical, calling Medvedev’s “innograd” and its tax breaks and half-billion dollar annual budget a black hole and a boondoggle. Without genuine reform, critics argue Skolkovo cannot possibly succeed – not when Russia ranks below Bangladesh in the World Bank’s Doing Business Index, and is tied with Kenya in the Corruption Perception Index.

Medvedev acknowledged as much at a Stanford appearance this week when a Russian in the audience asked him how he planned to protect promising startups from the Russian mafia, insane rivals (i.e. (”crazy Russians with crazy startups”) and bureaucratic obstacles.

“Of course we have plans,” Medvedev said. “In Russia, people hope the government will do something… but we must do it correctly. Russia has its own attitudes and says the task of the government is to create startup conditions, but that’s a very complicated point. Money can’t create it. We have money, but we don’t have Silicon Valley. It has to be money in the right hands, with the correct rules. If performed correctly, I’m sure the project will be a success, but everything depends on people and finally on you – if you’re ready to help.”

If it’s rules Medvedev’s after, he may want to talk to Paul Romer, the former Stanford professor whose “charter cities” concept finally received the feature treatment in the current issue of The Atlantic. As writer Sebastian Mallaby puts it, “Romer’s notion of “rules” includes “patent law, competition law, bankruptcy law, and so on, as well as the softer ‘norms’ that govern people’s behavior. Indeed, these rules could be even more important than technologies, however much the digerati of Silicon Valley might wish to believe otherwise. Without new technologies, an economy might grow slowly. But without decent rules, an economy cannot even make use of the technologies that already exist.”

It’s a shame Medvedev didn’t arrange a meeting with Romer on his trip; it probably would have proved more useful than learning how to tweet.

 

Fast Company  |  February 2010

The New New Urbanism: New Songdo & Creating Cities From Scratch

The world is bracing for an influx of billions of new urbanites in the coming decades, and tech companies are rushing to build new green cities to house them. Are these companies creating a smarter metropolis -- or just making money?

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Stan Gale is exultant. The chairman of Gale International yanks off his tie, hitches up his pants, and mops the sweat and floppy hair from his brow. He’s beaming like a proud new papa, sprung from the waiting room and handing out cigars to whoever happens by. Beckoning me to follow, he saunters across eight lanes of traffic toward his baby, delivered prematurely days before.

Ten years ago, Gale was a builder and flipper of office parks who would eventually become known for knocking down the Boston landmark Filene’s Basement and replacing it with a hole in the ground. But Gale’s fate began to change in 2001 with a phone call from South Korea. The Korean government had found his firm on the Internet and made an offer everyone else had refused. The brief: Gale would borrow $35 billion from Korea’s banks and its biggest steel company, and use the money to build from scratch a city the size of downtown Boston, only taller and denser, on a muddy man-made island in the Yellow Sea. When Gale arrived to see the site, it was miles of open water. He signed anyway.

New Songdo City won’t be finished until 2015 at least, but in August, Gale cut the ribbon on the 100-acre “Central Park” modeled, like so much of the city, on Manhattan’s. Climbing on all sides will be a mix of low-rises and sleek spires—condos, offices, even South Korea’s tallest building, the 1,001-foot Northeast Asia Trade Tower. Strolling along the park’s canal, we hear cicadas buzzing, saws whining, and pile drivers pounding down to bedrock. I ask whether he’s stocked the canal with fish yet. “It’s four days old!” he splutters, forgetting he isn’t supposed to rest until the seventh.

As far as playing God (or SimCity) goes, New Songdo is the most ambitious instant city since Brasília 50 years ago. Brasília, of course, was an instant disaster: grandiose, monstrously overscale, and immediately encircled by slums. New Songdo has to be better because there’s a lot more riding on it than whether Gale can repay his loans. It has been hailed since conception as the experimental prototype community of tomorrow. A green city, it was LEED-certified from the get-go, designed to emit a third of the greenhouse gases of a typical metropolis its size (about 300,000 people during the day). It’s an “international business district” and an “aerotropolis”—a Western-oriented city more focused on the airport and China beyond than on Seoul. And it’s supposed to be a “smart city,” studded with chips talking to one another, designated as such years before IBM found its “Smarter Planet” religion.

Being seriously ahead of the curve explains why Gale had such a hard time finding a tech partner to bring this dream to fruition. First in line was LG, one of Korea’s homegrown conglomerates. None of its ideas had made it past the prototype stage. Next up was Microsoft, which signed a deal giving it carte blanche to mold the city in its image. “Designing an entirely new city from the ground up provides a unique opportunity to create an ideal technological infrastructure,” Bill Gates boasted. But before he could even measure for drapes, Gale decided a plumber would be a better fit and threw Microsoft over for Cisco.

Last spring, the networking giant became New Songdo’s exclusive supplier of digital plumbing. More than simply installing routers and switches—or even something so banal as citywide Wi-Fi—Cisco is expected to wire every square inch of the city with synapses. From the trunk lines running beneath the streets to the filaments branching through every wall and fixture, it promises this city will “run on information.” Cisco’s control room will be New Songdo’s brain stem.

And that’s just the beginning. No longer content to sell just plumbing, the company is teaming up with Gale, 3M, United Technologies (UTC), and the architects of Kohn Pedersen Fox (KPF) to enter the instant-city business. At a Cisco event near New Songdo last summer, Gale stunned the room by announcing plans to eventually roll out 20 new cities across China and India, using New Songdo as a template. In the spirit of Moore’s Law, he says, each will be done faster, better, cheaper, year after year.

Cisco calls this Smart+Connected Communities initiative a potential $30 billion opportunity, a number based not only on the revenues from installation of the basic infrastructure but also on selling the consumer-facing hardware as well as the services layered on top of that hardware. Picture a Cisco-built digital infrastructure wired to Cisco’s TelePresence videoconferencing screens mounted in every home and office, with engineers listening, learning, and releasing new Cisco-branded bandwidth-hungry services in exchange for modest monthly fees. You’ve heard of software as a service? Well, Cisco intends to offer cities as a service, bundling urban necessities—water, power, traffic, telephony—into a single, Internet-enabled utility, taking a little extra off the top of every resident’s bill.

“We have the hardware in place and what we need now is the software,” Gale beseeched the Cisco execs in New Songdo. “It’s going to be a cool city, a smart city. We start from here and then we are going to build 20 new cities like this one, using this blueprint. Green! Growth! Export!” Jaws dropped. “China alone needs 500 cities the size of New Songdo,” Gale tells me. And he has already done the deal to build the next two.

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China doesn’t need cool, green, smart cities. It needs cities, period—500 New Songdos at the very least. One hundred of those will each house a million or more transplanted peasants. In fact, while humanity has been building cities for 9,000 years, that was apparently just a warm-up for the next 40. As of now, we’re officially an urban species. More than half of us—3.3 billion people—live in a city. Our numbers are projected to nearly double by 2050, adding roughly a New Songdo a day; the United Nations predicts the vast majority will flood smaller cities in Africa and Asia.

“Cities are becoming unsettled,” warns Saskia Sassen, the Columbia University sociologist who’s the leading expert on cities’ collision with globalization. “They will be the sites of new wars—wars for water, for a clean environment, and not to mention room for some 700 million people displaced by climate change.” Sociologist Mike Davis prophesied in his apocalyptic Planet of Slums that “the cities of the future, rather than being made out of glass and steel ... [will be] instead largely constructed out of crude brick, straw, recycled plastic, cement blocks, and scrap wood.” In many places, they already are.

It was this crushing demographic trend that drew Cisco into the instant-city business. Gale first approached Cisco CEO John Chambers five years ago, “but we weren’t ready,” says Wim Elfrink, Cisco’s chief globalization officer. It wasn’t until 2006, after former President Bill Clinton challenged the company to act on climate change, that it started thinking of building smarter cities. “Now,” Elfrink says, “we’re in catch-up mode.” Two years ago, Saudi Arabia’s King Abdullah bin Abdulaziz charged Cisco with helping to plan four new cities around the country, at a total cost of $70 billion. The aim was to establish a Saudi Silicon Valley, one designed to create a million-plus jobs and increase non-oil GDP by almost 50% in barely a decade. These “economic cities” were explicitly intended to house and employ nearly half of the 10 million Saudis under the age of 17—a largely uneducated workforce described as a “human time bomb.” Cisco’s job, improbable as it may seem, was to help defuse it. The first of these cities began opening last year, but none are as far along as New Songdo.

While the developing world wrestles with its impending population boom, the entire world is confronting an explosion of another sort: climate change. The battle against global warming will be fought in city streets. The world’s 20 largest megacities consume a staggering 75% of its energy. Buildings alone contribute 15% of all greenhouse gases, more than all forms of transportation combined (13.5%). Barring simultaneous breakthroughs in a raft of clean technologies—including solar cells, biofuels, and batteries—the fastest way to shrink cities’ carbon footprints is through conservation and efficiency. Unlike Walmart, which has a real-time glimpse into every store, truck, and warehouse in its system, cities are nearly impossible to parse. But hook them up to the right mix of sensors and software, the thinking goes, and who knows what efficiencies might suddenly be revealed? When buildings, power lines, gas lines, roadways, cell phones, residential systems, and so on are able to talk to one another, that information can expose patterns of waste and ways to avoid it. Just as wiring corporations made them leaner and meaner, wiring cities may be one way to tease efficiency out of dumb networks like the power grid.

For the last year, it’s been impossible to watch a football game without being exhorted by IBM to “build a smarter planet.” And it’s true that even a relatively simple retrofit of existing cities can make a substantial dent in emissions. In Stockholm, a high-tech congestion-pricing scheme that IBM helped implement has increased tax revenue by $80 million while reducing traffic and CO2 by 18%. An IBM smart-grid test in Washington State concluded peak loads might be trimmed enough nationwide to eliminate the need for 30 coal-fired power plants over 20 years.

“Everything can be connected and everything can be green,” promises Elfrink, who calculates that in addition to creating millions of jobs, smartening up cities could reduce emissions worldwide by 15% over the next decade, saving a ton of CO2 per person and nearly a trillion dollars. The smart-grid market alone “may be bigger than the whole Internet,” Chambers has said.

While IBM has so far focused on the gnarly and necessary task of retrofitting existing cities, Cisco has taken the idea a monumental step further by building new ones from the mud up. Cisco has already demonstrated how its technology could be used to orchestrate the energy use in New Songdo’s buildings, dialing up and down the heat, lights, and electricity. Its next step, Elfrink says, will be to create a sort of urban operating system, and then to identify and create services that try to streamline everything from health care to education to traffic to shopping. Cisco and Gale will take a slice of every transaction that runs through their software.

That Cisco is staking so much on a mudflat in the Yellow Sea is a reflection of Chambers’s grand plan to move beyond the sale of routers and switches. His lieutenants are busy chasing as many as 30 different billion-dollar opportunities, or what he calls “adjacencies.” New Songdo is where several of them intersect. “We used to be a plumber,” Chambers tells me at Bill Clinton’s latest confab in New York. “And we were proud to be a plumber. It’s a very honorable profession and we made a lot of money doing it. But now we’ve moved from plumbing to being the platform for innovation. And instead of taking the typical approach that most high-tech companies do, which is to sell stand-alone products and maybe think about how they tie together,” Cisco is “filling a void in the industry, where we’re providing both the technology architecture” and the vision to governments for “how you use this technology to change societies.”

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Just a few years ago, smart cities were seen as Blade Runner or Minority Report warmed over. Whatever guises they took—from “digital homes” to “ubiquitous computing”—it seemed no one really wanted the questionable convenience of videophones or Internet-enabled fridges.

“It’s more pragmatic now, because the overriding agenda is sustainability,” Elfrink insists over breakfast in New Songdo last August. Fluting in a pronounced Dutch accent, Elfrink, in town for the opening of the Incheon Global Fair & Festival, an ersatz expo held in New Songdo’s honor, is comfortable switching from anthropology to technical minutiae in midsentence. He spearheads strategy for Cisco from the company’s Bangalore campus and also runs its $7 billion services unit. “I was a keynote speaker at the United Nations Habitat conference in Delhi a few weeks ago,” he says. “They fought urbanization for years, because they thought they should slow it down. But you can’t stop it. It’s not a curse—it’s an opportunity.”

It certainly looks like an opportunity if you’re a technology company. A flurry of white papers has been issued by the likes of HP, Autodesk, Oracle, and Cisco on topics including “Digital Cities,” “City 2.0,” “Intelligent Urbanisation,” and even a “Central Nervous System for the Earth.” The market is so new that no one can pinpoint the exact size of what’s at stake. The best guess, offered by the research firm IDC, pegs the smart-infrastructure business at $122 billion over the next two years. A better answer may be: “How much have you got?” Governments are looking to cash $3 trillion in stimulus checks, and behind that comes an estimated $35 trillion in global infrastructure spending over the next two decades.

The near-term strategy of tech firms appears to be, Tap available pools of stimulus funds to pilot a smart grid here and a smart sewer there. Sooner or later, someone will need to pull it all together, and that means wiring cities from the ground up. IBM has chosen the unlikely venue of Dubuque, Iowa (population: 60,000), for its prototype, which is consistent with its more limited approach of retooling established cities, mostly in the West. Cisco is hoping to prove its model by embedding its technology in instant cities across the developing world. In addition to King Abdullah’s, there is Qatar’s Energy City and India’s Gujarat International Finance Tec-City, known by the all-too-appropriate acronym, GIFT. Six others are already planned. Elfrink estimates that at least $500 billion will be earmarked for instant cities over the next decade, with $10 billion to $15 billion allotted for network plumbing alone. Cisco hopes to pocket another $15 billion from the services running atop these systems, marketed to residents and mayors alike, starting with smart grids and meters. “The first phase will be very simple,” he says, “because people will spend money to save money.”

Cisco itself has spent a great deal of money acquiring the tools it hopes will lock in first-mover advantage. What is now Smart+Connected Communities was announced a year ago following the purchase of Richards-Zeta Building Intelligence, whose software links buildings over the Internet, for an undisclosed sum. The cities-as-a-service piece was added through an investment in an Australian startup called Majitek. Together, they will integrate the babel of proprietary systems created by the likes of Honeywell, UTC, and Johnson Controls to heat, cool, and power modern office blocks. And if Cisco’s $3.4 billion bid for Tandberg goes through, it will instantly propel Cisco to No. 1 in the videoconferencing market, pairing Tandberg’s desktop screens with Cisco’s room-size TelePresence models and possibly the set-top boxes from its $7 billion purchase of Scientific Atlanta. In the meantime, Elfrink and his deputies have wooed mayors, recruited experts, courted governments, and worked alongside KPF’s architects, 3M’s scientists, and UTC’s engineers to marry new energy-efficient materials and technologies with the urban Internet he envisions.

In announcing Cisco’s strategy, Chambers declared, “The network has become the next utility.” The metaphor is telling. Utilities are often natural monopolies, profiting endlessly from captive markets. Smart cities hold a similar fascination for Cisco, as places where basic services such as water or power might be repackaged as value-added products, throwing off lucrative consulting contracts essentially forever.

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Elfrink and Cisco’s official mission in New Songdo is sustainability—“from a social, environmental, and business point of view.” But on the ground last summer, Elfrink was audibly more excited by the prospect of a Boston-size sandbox for TelePresence, Cisco’s fastest-growing business. On opening day of the Incheon fair, he cuts the ribbon on his company’s pavilion with great fanfare, ushering guests inside for a glimpse of what’s to come. Although a few demos dutifully depict turning down the entire city’s thermostat, the two-way video screens are the stars of the show. In one scene, actors posing as doctor and patient conduct a dramatized remote checkup. “The killer app,” Elfrink tells me, “will be TelePresence. If you want to talk to your neighbors or book a table at a restaurant, you can do it via TelePresence.” Or you can attend class at New Songdo’s International School. Or practice yoga with your yogi. Or work from home, as Elfrink often does in Bangalore.

It’s hard to see what any of this has to do with sustainability, unless your plan to shrink your carbon footprint is to never leave your house. Seen from Cisco’s perspective, however, it’s all kinds of green. Installing screens and smart appliances in every home and office all but guarantees demand for the fattest pipes and biggest switches, and establishes Cisco as the gatekeeper between that underlying plumbing and every service built on top. Cisco and Gale will own the core of New Songdo’s consumer and metropolitan services, inviting third-party developers to fill in the gaps in exchange for a slice of each transaction—think Apple’s App Store for homes and cities. Imagine a wall-mounted flat screen, crowded with TelePresence calls, smart-meter readouts, and whatever else Cisco has to offer. How does $5 a month for a daily consultation from your toilet sound? “I would love to have nutritional advice first thing in the morning,” Elfrink says earnestly. “Is TelePresence going to be the next iPhone? I don’t know, but you can dream that big.”

In this way, Cisco seems to be moving beyond smart cities’ sustainability mission and into something close to social engineering. Ironically, this souped-up vision is what a smart city used to mean—and why no one wanted to live in one. People weren’t interested in appliances talking amongst themselves, and they didn’t want to run the risk of their houses needing a reboot. Tech executives called their disinterest a failure of “education” rather than a display of customers’ common sense. Cisco hopes to get around this problem in New Songdo by eventually installing TelePresence in every apartment whether residents want it or not. The assumption is that folks will quickly learn to love it. Build it, apparently, and they will come.

“The money pumped into economies under the guise of recovery packages, that’s the opportunity they’re trying to seize,” says Andrea Di Maio, a Gartner public-sector analyst. Di Maio skeptically notes that none of these would-be master builders have developed new technologies from scratch. Instead they’re bolting together what they have on hand and calculating the carbon savings that result. “Scratch the surface, and you start to wonder just how coherent this strategy really is,” he says.

“Cities are highly complex systems, and one of the elements of highly complex systems is that when you monkey around with them, their predictability goes to zero,” says Pip Coburn, a technology analyst whose book The Change Function argues that the reason so many technologies fail is because the pain of changing old habits outweighs any benefits. And when it comes to something as complex as cities, he says forget it. “If you’re trying in advance to define a future city, you’re out of your mind. You’ll spend years and money disrupting people’s lives.”

It would be one thing if New Songdo were a one-off experiment, but Gale has assembled his dream team of architects and technologists with an eye toward cracking the code of urbanism itself. “There’s a pattern here, repeatable,” he tells me. He won’t be content until he can standardize and mass-produce his cities in half the time for China. Indeed, New Songdo’s first clone will break ground this year on the outskirts of Changsha, a provincial capital larger than Singapore. The Meixi Lake District will be larger than New Songdo and just as dense, smart, and green—and eerily familiar. This and every subsequent city will be standardized around Gale’s partners’ products: the same light fixtures, traffic signals, elevators, fuel cells, central air-conditioners—and TelePresence screens. The scope of his ambitions dovetails neatly with Cisco’s. “We’re trying to replicate cities,” Elfrink says bluntly, but “we have no standards. Every city is a new project, a new process, a new interface,” he continues, marveling at the inefficiency. “You shouldn’t spend time on an elevator. You shouldn’t spend time on lighting.”

Gale’s timetable is, if anything, too slow for Elfrink, who expects to sign deals with an additional half-dozen municipalities this year. “We want to create an ecosystem of partners who standardize the things that can be standardized, and then spend their energy on customization. Because a city in Korea has a different social dynamic than a city in China, or a city in Brazil.”

————

It’s true that Korea is different, which is why Cisco chose New Songdo as its test bed. Korea has always been a ravenous adopter of technology—it has had smartphones, social networks, and universal broadband for nearly a decade. But the country is also something of a boneyard for big ideas that never quite caught on, including smart cities that look pretty dumb in retrospect.

“It’s quality of life as a service,” complains Adam Greenfield, the head of user-interface design for Nokia and the author of Everyware, a Ninety-Five Theses for ubiquitous computing. “Everything we think of as organic and emergent in cities is absent. In Korea, everything is just dropped onto a map. They clear out a rice paddy and suddenly it looks like the Upper West Side.”

Take Tomorrow City, an $82 million showcase for the abandoned “U-Life” demos by Gale’s original partner, LG. On my last day in New Songdo, I enter the place just as Elfrink is leaving with a pack of customers in tow. Tomorrow City is the Ghost of Smarter City Past—the product of a vision in which the uses for a given technology are concocted in a lab or a marketing department and pushed down onto consumers. In this (now frozen) vision, our U-Lives will boast U-Galleries for our art collections and U-Libraries with wall-size screens; U-Health confirms we’re getting fat and recommends a U-Workout on the treadmill; after a shower, U-Beauty grafts our faces onto the heads of Korean teenagers and suggests a new hairstyle for the day; our U-Closets propose outfits for the office.

Smarter-city flaneurs such as Nokia’s Greenfield or Carlo Ratti, who directs MIT’s Senseable City Lab, doubt anyone will ever be able to dictate a killer app for cities. Even in the incubators Cisco is building across the Arabian Peninsula and China, the inhabitants are likely to have their own ideas for the uses of things.

Greenfield envisions three scenarios for Cisco’s smart cities, including New Songdo. “One, you install the screens and nobody uses them, ever—people are set in their ways and the technology dies from disinterest. Two, there’s some initial uptake, but because you designed the system so rigidly, they give up. Three, the best case is that people take it up in some way that it is enormously successful, but it has nothing at all to do with what the planners and strategists ever imagined.”

Condé Nast Traveler  |  February 2010

Triumph of the Air Warriors

In Up in the Air, George Clooney revels in Airworld, a ten-million-mile flier's paradise of airports, lounges, and jet-iquette. Who lives like this? Meet the FlyerTalkers, the world's greatest passengers, who stockpile miles for currency, who make their cause the dignity of the frequent flier. Greg Lindsay joins them on a mad marathon of gate-hopping, champagne-quaffing stratospheric ecstasy.

“To know me, you have to fly with me,” says George Clooney in Jason Reitman’s new movie, Up in the Air–a hard-edged romance of the American flight from life below during this cruel era of economic contraction. He also says, “Moving is living.” Clooney plays Ryan Bingham, an employee-termination expert who is so determined to live aloft that he’s concocted his own cracked brand of Zen, which he teaches at business conferences: Let go of your home, your family, all your earthly possessions, and just go.

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“I call it Airworld,” Bingham says in the novel by Walter Kirn on which the movie is based. “The scene, the place, the style. My hometown papers are USA Today and The Wall Street Journal. The big-screen Panasonics in the club rooms broadcast all the news I need, with an emphasis on the markets and the weather. . . . Airworld is a nation within a nation, with its own language, architecture, mood, and even its own currency–the token economy of airline bonus miles that I’ve come to value more than dollars. Inflation doesn’t degrade them. They’re not taxed. They’re private property in its purest form.”

For you, Airworld is the nowhere you pass through on your way to a meeting or a vacation. It’s the series of tubes from security to your gate, and to the rental car lots, chain hotels, and fast-casual restaurants. At every stop, if you’re savvy, you earn precious miles. American Airlines launched the first frequent-flier program almost 30 years ago on a lark; United followed suit a week later. Therein lies the tale–and many free trips to Hawaii. These led to real-life Clooneys endlessly chasing miles–and who knows what else.

The most fervent citizens of Airworld congregate on FlyerTalk, the Facebook of frequent fliers. It’s the largest, most vibrant community of travelers on the Web, with 232,000 members. Their archived chatter contains enough hard-earned wisdom to turn any conventional seasoned traveler into an instant aviator. FlyerTalk launched in 1998 as a haven for “mileage runners”–the airline junkies who endlessly orbit through Airworld racking up miles.

But we are all frequent fliers now. Roughly 100 million Americans flew four or more times last year. The great American crossroads–Atlanta, LAX, O’Hare–are practically cities in their own right, with daily populations in the six figures, and their transients, like Clooney’s Bingham, are Airworld’s natives.

You can hear echoes of the Jet Age in the FlyerTalkers’ madcap dashes around the world. They re-enact all of our half-forgotten dreams of flight: Americans’ essential faith in the open road; restless itinerancy; self-renewal through forward motion. Of course, it can get out of hand. Up in the Air’s Ryan Bingham, according to Kirn, is a walking, talking, jet-setting metaphor for addiction.

Addicted to what? Airline miles are now a currency like any other, legal tender not just in Airworld but in the economy of flat-screen TVs, washing machines, and even diamond rings. There are an estimated 17 trillion miles in circulation right now, which would get you two-thirds of the way to Alpha Centauri. At their nominal exchange rate of a penny per mile, that’s $170 billion–more than the currency reserves of either the United States or Germany. Only a fraction are redeemed, for some 40 million free trips a year. The miles are worth more than the airlines themselves. Not only that, but they are a fact of life for the economy: American Airlines’ mileage program, the largest and oldest, now has upwards of 60 million members–one in every five Americans. Meanwhile, our credit cards are pumping out miles by the billion. They were a currency invented and circulated by the airlines–ready for arbitraging. One flier I met buys a new car’s worth of plane tickets annually but redeems his miles for tickets worth the equivalent of a new house. Miles aren’t taxed. The airlines have caught on to their true worth, selling billions of them to credit card companies for hundreds of millions of dollars.

*

FOR some time last year, a driven, delirious group of air warriors had been planning a kind of convention that would climax in a paroxysmal celebration of Airworld mania in Frankfurt in which champagne would be drunk, fuselages would be stroked, first-class lounges would be plumbed for pleasure. It would be the ultimate miles reward. When I asked to jump aboard, they embraced me. My expedition was led by Tommy Danielsen, a ruddy-faced Norwegian who had amassed millions of transatlantic miles. I joined them in Chicago. We were to start at O’Hare, fly to Newark, connect to JFK, and then . . . on to Frankfurt! After a day of rest and champagne, we would hop a chartered flight to Oslo, then Toulouse, and then back to New York in 24 hours. We were never to leave the airports. Some people like Paris, Prague, and Vienna. Control towers, hangars, kitchens, and first-class lounges were the sights this group wanted to see.

It was dubbed the “Star Alliance Mega DO,” after the largest of the airline alliances, whose 25 members included our hosts–United, Continental, SAS, and Lufthansa. They called it a DO after a big to-do, and this one was mega, with more than 200 globe-trotters pinballing around Europe; joining in aerial cocktail parties; dive-landing the airports; kicking the tires on a 747; mingling with the very airline executives who control mileage exchange rates, and calling them on the carpet for shoddy service. For some this would be paradise, and among those people are the last commercial travelers in America who love gaming miles, who love to fly for flying’s sake.

“It’s an arbitrage game,” said Seth Miller in the Red Carpet Club at O’Hare. “Buy cheap and redeem high.” A boyish consultant with perpetual bedhead, Miller last fall cashed in 95,000 miles (a relative pittance) for a diving expedition in the Philippines, sandwiched between a stopover in Seoul and a long weekend in Toronto. His smirk concealed trade secrets.

*

“I also did sushi in Tokyo for 48 hours at the end of three days of transcon running,” Miller added. “That was an eight-night window where I spent six sleeping on planes. I went to Trinidad and Tobago for 36 hours at the beginning of the year because it was a weekend special from Continental. In January, I also hit England and Luxembourg one weekend. Then a group of us headed to Belgium for good beer. . . .” He went on, blissed out by a weekend when “I was traveling for 58 hours and took 13 flights, including two different trips to Puerto Rico.” FlyerTalkers have built an entire culture around this kind of incessant perambulation, and theyre addicted to its trade secrets.

In many ways, they’re the flip side of Clooney’s Ryan Bingham, who retreats into Airworld to hide, terrified of making human connections. When he tries, he’s horrified to learn that his Airworld is actually a prison. Up in the Air is a cautionary tale about mistaking virtual contact for intimacy and loneliness for freedom. But the air warriors counter the soul-crushing anonymity of Airworld with their own community. They’re still true believers in the dream of unfettered flight.

As Seth Miller said, it’s arbitrage: Invest a little time and as little money as possible per mile earned in return. Scour the Web for low fares to nowhere, stuff your itinerary with extra legs, and take off. It doesn’t matter where. “Like any addiction,” one air warrior said, “you don’t care where you end up.” The payoff: Collect your mileage bounty so you can go where you really want to.

“If you hate flying, you’re not doing it right,” says George Clooney as Ryan Bingham. Doing it right demands miles. Garner enough to hit the airlines’ targets and you’ll receive elite status with a bevy of perks: priority boarding, waived baggage fees, mileage bonuses, private lounge access.

*

THEY’RE hackers, really, cracking fare codes and exploiting seams until they’ve twisted the airlines’ own bewildering rules inside out. FlyerTalkers get a kick out of this, and brag among themselves. They use the same freely available tools as travel agents do, peel off the lids of the reservations systems and peer inside, taking detailed notes on ways to fly well and practically for free.

At this point, you might be forgiven for wondering what these people do all day to have this much time on their hands. They are consultants, salesmen, CEOs. The old-school air warriors lived in hotels and first-class lounges–work demanded it. FlyerTalkers are a different breed, masters and captains of their own lives. Rebelling against being herded like sheep, they banded together to assert their flier rights–exploiting loopholes, pooling information, leading a jailbreak from coach to the front of the plane. They made the airlines sit up and return some of their passenger dignity. You might also think of them as the shock troops of capitalism. Like Clooney’s nonstop flier, they believe that in a video-beamed world there’s no substitute for human presence.

In the lounge at O’Hare, I polled lawyers, bankers, Microsoft programmers, information architects, grad students, and accountants. They embodied the perfect mileage-runner skill set: bright, fantasy-minded people who see travel as a satisfying puzzle to be solved. Some of their schemes border on the baroque or self-parody. One especially devious mileage runner discovered that he could purchase dollar coins from the U.S. Mint on airline-branded credit cards, thus earning miles for buying money–miles that the Mint itself was effectively laundering. There was David Phillips, “the Pudding Guy,” a FlyerTalker who gained national attention when he bought more than 12,000 cups of Healthy Choice pudding at 25 cents each, in the process earning 1.25 million miles and lifetime Gold status on American Airlines.

The airlines know this and occasionally welcome it, because FlyerTalk also serves a kind of consumerist purpose. Its members are the ultimate focus group: knowledgeable, entitled, and ready to speak their minds. In 2005, then Continental Airlines CEO Lawrence Kellner and a FlyerTalker named Dean Burri made a bet. Burri wanted Kellner to take their complaints seriously; Kellner told him that if he could find more than 60 FlyerTalkers willing to pay their own way to Houston for dinner and a tour, Kellner himself would host them. Nearly 300 showed up. Their loud feedback was responsible for Continental’s improving its Web site, standby and upgrade lists, arriving connections, even menus on the flights.

If air warriors have a spiritual guru it’s Randy Petersen, FlyerTalk’s founder and a prophetic-looking advocate of the pleasures of Airworld. “These people really do live an entire travel lifestyle, and miles are the easiest way to get around,” Petersen told me. With his nasal drawl and long white hair, he looks the part. Since dropping out of menswear merchandising 24 years ago to start a frequent-flier newsletter, he’s put three million miles under his belt. “We have an entire generation of boomers who’ve started to retire with a nest egg of miles, because they’ve seen a lot of places. In the old days, they might have retired to a Winnebago, but today it looks a lot more like a 777. They’re not going to Sarasota to see the grandkids; they’re taking the grandkids to Sarajevo.”

FlyerTalk’s expansion is Petersen’s best evidence. The site is growing faster every day. The mileage know-how of the air warriors is trickling down to the general population.

*

ROLANDO Veloso, an Argentinian air warrior living in New Jersey, was flying practically every day until the recession. “It feeds the beast,” he says. “Once you get used to the premium cabins, you can’t go back.”

Veloso was raised by his mother, a travel agent from Buenos Aires. One of his earliest memories is of falling down the spiral staircase of a Pan Am 747 at the age of three. His employer is a Swiss firm named Eclinso, which sells the software for clinical pharmaceutical trials. He flies in, trains doctors, and flies out. Highly complicated and regulated, it’s not something you can do over e-mail. “My territory is the glue” for assembling miles, he said. Once they needed him in Bangkok in three days for a session. He hopped a flight to Paris on Christmas night, then flew to Bangkok and on to Sydney–for the miles, of course. There were also the indignities–wasted trips across the country and nights spent on airport floors waiting for delayed flights. But he got the miles–800,000 on Continental, and he was gunning for a million and the lifetime elite status that comes with it.

I sat with Fozz Mahmud, an Indian who, with his prodigious chin, has more than a passing resemblance to a bullfrog. He flew 300,000 miles last year. Mahmud told me how he had become homeless. It had all started innocently enough four years ago in San Diego when he began consulting for Symantec, which supplies anti-viral software for PCs. “When I took the job, I was told, ‘Don’t worry, you’ll be home 90 percent of the time.’ In my first two and a half years, I was home for two weeks.”

Mahmud accepted a transfer to New Jersey, rented out his house in California, and put his things in storage. “It’s great for a while,” he said, laughing ruefully. “I would get home on Friday, camp out on the couch, and order takeout. By Sunday evening I was already packed.” In the last two months, he had spent his weekends in Singapore, Kuala Lumpur, Tokyo (twice), San Diego, San Francisco, Seattle, Houston, and New York. “I’m 35 years old,” he said. “There’s only a finite amount of time in your life to get away with something like this. I have maybe a year left.”

Even among the FlyerTalkers, one member inspires awe. Rob Cole, a.k.a. Kiwi Flyer, is a soft-spoken New Zealander whom Randy Petersen regards as the king of the mileage runners, with seven million lifetime miles. Three years ago, he took a double around-the-world trip in the single-minded pursuit of lifetime elite status on Qantas. Sixty-six flights and 146,040 miles later–all of it in business or first class–he had it, and had nearly drunk his weight in more than a dozen varieties of champagne. His detailed trip report on FlyerTalk.com was entitled “A Fine Line Between Pleasure & Pain.”

Rob Cole comes and goes as he pleases from the Antipodes; one moment he’s in Auckland, the next he has materialized in Oslo. He’s on the road for purely personal reasons 40 weekends a year. “I just love to travel,” he told me quietly, refusing to even scratch the surface of what drives him. In 2008, he visited 41 countries, 23 of them new to him, and spent 44 nights up in the air–more than he slept in hotels.

Through the window at JFK’s Lufthansa lounge, we could see our ride show up–a floodlit, bone-white 747. It was there to pick up 88 FlyerTalkers who represented 24 million miles–enough to take the entire group to the moon. People tried to balance plates, champagne flutes, and ludicrously powerful digital cameras as they rushed to soak up the three-level lounge, which had reopened last January after a $10 million overhaul. No other airline has invested as much in over-the-top luxury for its most frequent fliers–Lufthansa has spent $200 million on luxury lounges in Frankfurt, Munich, Paris, and Mumbai.

Several hours over the North Atlantic, I turned to Art Pushkin. By then, the cabin was a cocktail party. Pushkin–in chinos, a rumpled sport coat, with glasses and closely cropped steel-gray hair–kept his distance from the mileage runners. Only one thing gave him away: a pin in the shape of a cockroach, emblazoned with the logo of US Airways. Pushkin is a legend in airline circles for leading a popular uprising against his old carrier, and when that failed, for leading a mass defection.

One of his co-fliers said the airline made him feel like “a scheming cockroach,” so Pushkin coalesced a group that dubbed themselves the Cockroaches. “If I’m on your airlines every week,” he said, “that makes me a loyal customer.” After they made enough noise and threatened to take their business elsewhere, the airline caved and threw a party–a “Roachfest”–for the mutineers.

Then the merger happened. US Airways was acquired by America West, whose no-frills CEO, Doug Parker, made it clear there would be no accommodation and no surrender: He was intent on remaking the airline into a low-cost carrier on a par with Southwest. The Roaches went to war. “When they messed with us,” said Pushkin, “it lit a fire.” The Roaches handed out Hershey’s Kisses to the US Airways flight attendants to show they cared, and sent gift baskets to the call center employees whose jobs were being outsourced overseas. So Pushkin began planning the Roaches’ escape, contacting Continental’s envoy to FlyerTalk to switch allegiance with their mileage status intact. Hundreds switched.

Behind the defection was Pushkin’s ethic: Business travelers are the bedrock of the industry. “My wife thinks I’m crazy, but she knows I’m a passionate person. I’m a volunteer firefighter–my personal value is to give back.”

Near the end of our conversation, a flight attendant knelt by his seat and said, “I understand this is your first flight on Lufthansa. We’re honored to have you here.”

*

IN Frankfurt, we were celebrated and feted as true air warriors. We spent our days behind the scenes at Lufthansa, running our hands over the bellies of 747s, crawling into the cockpits, and climbing into the crew’s private rest area to take a nap. We watched a posse of junior flight attendants serving their superiors test dinners and studied a row of lunar lander-like flight simulators shuddering from simulated turbulence. We were addressed by Lufthansa CEO Wolfgang Mayrhuber, who toasted the air warriors as heroes. “Every child aspires to be mobile,” he told the group, “to get out to see other parts of the world. Mobile societies are always the ones that drive the world forward, and you are the leading gear.”

By the time we left Frankfurt, the plane had taken on a Hawaiian motif. Each of the three legs on our jaunt across Europe–to Oslo, Toulouse, and home to Frankfurt–had a theme. This morning’s was Continental Airlines’ first flight from Los Angeles to Honolulu, circa 1973.

“Aloha!” bellowed Tommy Danielsen, draping leis over our heads as we boarded the charter in the pre-dawn darkness. Don Ho was playing on the PA. The chief air warriors were dressed in Hawaiian shirts and jeans.

In Oslo, it was snowing as we descended–the landscape was a blanket of thick wet flakes, “a Norwegian cliché, Danielsen snorted. Our plane taxied to a stop at the edge of the airfield, where we clambered down stairs to buses waiting to ferry us to a hangar. We slipped and slid across the tarmac, throwing snowballs. “This isn’t even Europe,” someone said. “This is just someplace along the way.” He was right; we were not in Oslo but a freezing pocket of Airworld.

struck up a conversation with Daniel Krupnick, who works for an Internet company in Tel Aviv. He has a second job on weekends, flying to Buenos Aires for a two-and-a-half-hour meeting before turning around and flying home. What they talk about, he wouldn’t say. But it has to be in person–a matter of trust, he said. He estimated that his shadowy employers have spent more than a million dollars to date flying him in first class. His advice is evidently worth that. Krupnick is 24. I took it on faith that he’s some sort of savant.

Our conversation ended abruptly with a pop! Our hosts from SAS had fired the emergency slide on one of their planes as a stunt. Krupnick’s jaw dropped. “Oh my God,” he said, “that just cost $30,000.” And sure enough, it had–emergency slides can’t be repacked. The first one gleefully down the chute was Tommy Danielsen; Seth Miller was close behind.

On final approach to Toulouse a few hours later, we were so distracted by the A380s on the tarmac that at first we didn’t notice that our plane hadn’t quite landed. In the cockpit, the computer monitored our elevation in feet–“50 . . . 40 . . . 30 . . . 20 . . .”–and then stopped. Shouts of “Pull up!” started to echo through the cabin. The computer warned that we were running out of runway. At the last moment, the captain pulled back on the stick and gunned it, steering us into the sky. We could all see him pump his fist through the open cockpit door. All we heard were our whoops over the engines.

*

MY own initiation into Airworld happened by sheer luck. An impish mileage runner named Marty passed me in the terminal on our last afternoon in Frankfurt and asked mischievously, “Would you like to watch me upgrade a non-upgradable ticket?” Intrigued, I fell in behind him.

While we were waiting at the check-in desk, he unfurled a crumpled certificate that I recognized as worth its weight in gold: a System-Wide Upgrade, or, in FlyerTalk parlance, a SWU. Given only to top-tier fliers, a SWU entitles you to an upgrade anywhere the airline flies, and he was holding one for Lufthansa that didn’t have his name on it. Sure enough, he returned with a first-class ticket jacket. “I’m so excited to use the VIP terminal!” he squealed.

On the way back to the hotel, he proudly displayed his boarding pass to jealous peers.

“No way! How’d you do that?” they exclaimed.

Not content with the scope of his con, Marty hatched a plan at the bar that night to smuggle five of us into Lufthansa’s first-class terminal. He knew the stipulations by heart: Each passenger is allowed a guest as long as he or she is booked on the same flight. We would get around that by upgrading one of us using his method and by booking me a first-class ticket on their flight to LAX. Seeing that my eyes went wide at this, he brushed it off. “No worries,” he said. “It’s a fully refundable ticket. You’ll cancel it the moment you leave the terminal.”

Commandeering my laptop, he proceeded to bulldoze his way through a blizzard of screens to book my ticket. The Web has not only made it possible for anyone to be their own travel agent but also to see, for example, exactly how many people are sitting in business class or first, and roughly how much they paid–whether a full-fare ticket, a discount, or an upgrade. Prying open Lufthansa’s computers, he could tell that first class was wide open. Ten minutes and a phone call later, he had siphoned off a chunk of his United miles to book me into first. We would pick up the tickets in the morning.

But morning rolled around and there was a snafu at the ticket desk–United had booked me into business class, not first. Marty whipped out his cell phone, called United, and was promptly transferred to a call center in India, which enraged him. But he put the call on speaker phone while he reasoned with the agent, and his calm demeanor never cracked. “Be nice,” was someone’s crucial bit of advice. “Confrontation never works.”

As the minutes ticked by, he played the airline reps off each other, wooing Lufthansa to his side. Finally a compromise: United would clear my ticket through its own rep halfway across the terminal. As we trotted along the terrazzo, Marty wailed operatically, “This wasn’t supposed to happen! This is why I left United!”

The red tape finally cleared; we were given permission to enter the first-class terminal. Our assistant took our passports, then ushered us through security and into what could pass for the lobby of an especially Teutonic Ritz-Carlton, built at a cost of $43 million. Downstairs was the fleet of Porsches, BMWs, and Mercedeses waiting to whisk us to our plane. We did our best to play it cool, barely refraining from giggling as we were led to a table in the restaurant for breakfast.

The staff eyed us warily. “We’ve been on a charter, flying around for days,” Marty said. “We’re all a little tired,” he added, in a subtle dismissal of our hovering attendant. “Now, if I may make a point: Where is the champagne?”

Taittinger Rosé was served with pastries fresh off the first flight from Vienna. Marty began plotting his next mileage run: a mistake fare on Continental from Seattle to Tokyo for $580 round-trip, fully upgradable. We toasted. I left Marty making preparations to take a bath in the lounge’s full-size bathtub. But there was a rub. It turned out that Rolando Veloso, the Argentinian air warrior with 800,000 Continental miles, had designs on the tub as well. There was a trophy to be claimed for coming here, and only one flier would have it: a rubber ducky, across the front of which read clearly: lufthansa first-class terminal. In Airworld, the Lufthansa rubber ducky is the golden fleece.

Fast Company  |  September 2009

Heard of Allegiant Air? Why It’s the Nation’s Most Profitable Airline

Why Allegiant Air is the nation's most profitable airline, soaring amid the slump in travel.

Allegiant Air

You’ve probably never heard of the most successful airline in America. That’s because Allegiant Air is not for you. It eschews business travelers, daily flights, even service between major cities. Allegiant is the anti-airline, or as CEO Maurice Gallagher calls it, the “accidental airline.”

But it’s no accident that Allegiant’s planes are full, profits soared 200% in the first quarter to $28.2 million, and the number of passengers is up 18% through May during the worst recession in recent memory. While competitors furiously cut back, Allegiant has boosted capacity 30%. The more intriguing question, though, is whether its rock-bottom fares, bootstrap approach, and focus on the places abandoned by the hubs and spokes are the new blueprint for building an airline in tough times.

Gallagher thought he had survived those already. When he took over Allegiant in July 2001, two months before 9/11 terrified passengers and froze credit markets, the JetBlue model—tons of cash, a single hub, and brand-new planes—was the way to go. The onetime ValuJet cofounder (who left the airline after its horrific Everglades crash in 1996 and subsequent merger with AirTran) moved his single plane to Las Vegas and set out to reinvent the business. Certified to fly MD-80s, aging warhorses of the skies, Allegiant could acquire used ones for as little as $4 million, one-tenth of what it costs Southwest to buy a new 737. With no access to capital, Gallagher didn’t have much choice. But the plane is a gas-guzzler—fuel costs can be as much as half of expenses—so Allegiant couldn’t afford an empty seat; keeping the planes full spread the cost across more passengers. “We needed a strategy that was low cost and could make money from day one,” Gallagher says. “Slowly, we figured it out: Go where they ain’t.”

That meant connecting Vegas—and later other tourist destinations such as L.A., Orlando, and Phoenix—to dozens of otherwise empty airports in third-string cities such as Peoria, Fresno, and Toledo. Allegiant faces competition on only 6 of its 134 routes. It doesn’t try to steal other carriers’ passengers; it stimulates new ones with cheap fares. “There’s little the airlines can do [to compete] without cannibalizing their route structures,” says Helane Becker, an aviation analyst at Jesup & Lamont Securities.

Because, except for the fuel, the MD-80 is cheap to operate, Allegiant doesn’t need to fly its aircraft every minute of the day, unlike its competitors with new, rapidly depreciating planes. It can afford to serve smaller airports infrequently—as few as three or four flights a week—making more efficient use of its fleet. It serves 40 destinations from Las Vegas with just 14 planes. Its average flight is 90% full.

While major carriers have turned to charging for amenities out of desperation, Allegiant has always seen flying as an à la carte experience and has raised billing to an art form. Allegiant charges $13.50 just to book (like Ticketmaster); $15 for the first checked bag; between $5 and $25 for a seat assignment. (No surprise, then, that the Ryan family behind Ireland’s discount carrier Ryanair feels a kinship with Allegiant and invested in an early financing round.)

And although it’s usually possible to buy a vacation package from your airline’s Web site, Allegiant actually woos its customers to do so, enabling it to position itself as a vertically integrated travel company. It sold 400,000 hotel rooms last year, along with extras such as beach towels and suntan oil for the trip. Financial catastrophe has been a boon, as oil’s drop from its summer 2008 highs translated to lower fuel costs, and deserted hotels meant more discounted inventory to sell to passengers lured onboard by $9 teaser fares.

At that price, or even at Allegiant’s average one-way fare in 2008 of $84.97, Americans are still willing to fly. Meanwhile, ancillary revenue per passenger rose 52% in the first quarter, to $34, comprising nearly a third of the company’s business.

The advantage of this pricing structure is psychological. “We collect $110 from you at the end of your trip,” Gallagher says. “If I tried to charge you $110 up front, you wouldn’t pay it. But if I sell you a $75 ticket and you self-select the rest, you will.”

Allegiant has room to grow. “There’s still a lot of small markets it could tap into,” says Forrester Research analyst Henry Harteveldt. “It just started flights into Los Angeles, and a third of its passengers are buying tickets in L.A.” Gallagher presumes those travelers are commuting to second homes outside Billings, Montana, and the like. In Europe, this phenomenon is known as the “Ryanair effect.”

Gallagher concedes there’s not much more to squeeze from passengers in flight, but suggests Allegiant’s destiny may be digital. Having built an integrated travel company, he can see a day when Allegiant is as much a portal as it is an airline. “We think there will be 100 million people who will have flown us, and they could eventually turn to us to put them on a plane” flown by a nominal competitor, “and put them in a Hyatt,” he says. “We joke we’re an Expedia with wings.”

Fast Company  |  May 2009

Honeywell’s GPS-based Landing Tech Could Save Airlines Billions

The first salvo against interminable flight delays is Honeywell's new GPS-based landing technology. It could also save billions for the airlines.

Honeywell

In January, passengers aboard Qantas Airways’ Airbus A380 flagship, the Nancy-Bird Walton, were taken on a slight detour during their final approach to Sydney. The plane swooped by the funeral of the actual Nancy-Bird Walton, Australia’s answer to Amelia Earhart. The plane’s sheer size might have shocked her, but she could have taken the stick and landed safely—the technology hasn’t changed much since the 1930s.

The pilots decided to honor her passing with an aviation first: turning off their ancient instruments and switching on a GPS-guided, all-digital system. Using satellites to continuously calculate its speed, altitude, and proper approach, the hulking plane nimbly touched down only inches off the centerline, the first GPS-powered landing by an A380. “I’ve heard other pilots say this is as great a leap forward as the jet engine, which I thought was a bit of an overstatement,” says Captain Alex Passerini, who was on the flight deck that day. “But this is certainly more exciting.”

As it turns out, putting a GPS receiver on a plane is easy, but correcting for its margin of error—as much as 30 feet for a rapidly descending airliner—isn’t. For that, pilots need an assist from the ground. Enter Honeywell Aerospace, an arm of the $37 billion industrial conglomerate, which has supplied Qantas and a growing list of airports and airlines with the only available ground-based augmentation system (GBAS) for GPS-enabled navigation.

GBAS, which Honeywell calls SmartPath, is the first piece in a much vaster plan to overhaul air-traffic control. (To learn how GBAS works, see the next page.) The entire next-generation system, prosaically dubbed NextGen, is 15 years behind schedule, and another 15 years out, with a $15 billion price tag. One expensive long-term alternative is to build more runways: Chicago’s O’Hare, for example, will spend $13 billion and 20 years realigning and adding runways to increase the number of takeoffs and landings by 20%. GBAS is ready to produce these kinds of efficiency improvements today—for pennies on the dollar. It’s an ideal example of the good that a seemingly insignificant “shovel ready” project can do.

The airlines just might be able to save themselves if GBAS can save them a little time. Aviation consultant Michael Boyd estimates U.S. airlines waste $9 billion a year on delays beyond their control—more than the combined losses of all the world’s airlines in 2008. Relieving congestion in the most crowded hubs (35 airports handle 80% of domestic flights) could be all that stands between the airlines and profitability. Not to mention between a safe and pleasant flight and terminal hell. “We’re trying to help the airlines fly better and really synchronize their operations into and out of congested airports,” says Honeywell Aerospace president and CEO Rob Gillette.

SmartPath awaits imminent certification from the FAA. The stakes for Honeywell are huge. Setting a de facto industry standard, it has a two-year head start on its competitors to switch every large airport in the world over from the current radar-based instrument-landing system (ILS) to its system. It pegs the existing market at 2,178 airports worldwide. (Hundreds more are being built in China and India.) It expects SmartPath to be up and running at 600 airports by 2020 at a base price of $2.5 million apiece, producing $1.5 billion in revenue.

GBAS will ripple through the air-traffic system. “The numbers can get really big really fast,” says T.K. Kallenbach, VP of marketing and product management for Honeywell Aerospace. It offers airports and pilots 26 separate approaches, as opposed to the one glide path in use now. Some will allow for fuel-saving continuous descents instead of stair-step approaches; others can keep the noise down by weaving around residential neighborhoods. GBAS will even make a difference on the ground, as taxiing planes can stick close to the end of the runway, saving minutes that compound over the course of a day. Most important, planes can fly closer together in all types of weather, making vastly more efficient use of the sky.

Honeywell and Continental Airlines are testing just how much the system can alleviate delays in the most daunting petri dish: Newark Liberty, the most congested airport in the country for four of the past six years. During rush hour at Newark—say, 6:30 on a Friday night—GBAS might yield at least a 25% improvement. Continental hopes that by landing four additional flights per hour during poor weather, it can slash ground delays in half, reducing the teeth-grinding time spent waiting at the gate by 45 minutes.

“Suddenly Continental no longer has congestion there, or in Houston, or any of its other hubs,” Kallenbach says. “It’s actually the second-order effects that deliver all of the big savings.” Maybe the biggest is the reduction in fuel costs caused by delays (along with a shrinking carbon footprint), because planes will no longer get stuck burning fuel while waiting for clearance to take off and land. “The benefits are there,” Gillette says. “People should have been doing this already.”

Inside the Next-Gen GPS-based Airplane Landing System

1. Plane Plane Go

GBAS receives microwave signals from 4 to 13 GPS satellites. “The most difficult thing isn’t determining the plane’s GPS position, but ensuring SmartPath doesn’t cause any errors,” says Honeywell’s T.K. Kallenbach, who has refined the system so that the chance of receiving erroneous data from even one satellite is essentially less than one in 10 million.

2. Meter Maids

The heart of GBAS is the four GPS antennae mounted around the airport. Unlike radar, they aren’t prone to interference and can be placed almost anywhere. The raw feed is accurate within 10 meters. The finished product—data for every plane in a 23-mile radius are collected, compared, contrasted, and harmonized by proprietary algorithms—is precise within 1 meter.

3. The Big Broadcast

Using these corrected coordinates, a VHF antenna broadcasts approach paths to the planes. These are passed to an onboard multimode receiver.

4. In the black box

The onboard multimode receiver, a black box, parses ILS radar, GBAS data, and the plane’s own GPS. “Imagine that it knows where you are and it’s talking to the ground, which explains where it wants you to go,” Kallenbach says. “One continually updates the other.” The raw data are rendered in a pilot-friendly interface, and the pilot isn’t likely to notice many differences between GBAS and the instrument landings she is used to. Training to land with GBAS doesn’t require much time in the simulator.

5. A Different Approach

The approach path is logged by the captain upon filing her flight plan. GBAS recognizes this and digitally broadcasts 26 separate paths to incoming planes and guides them in (ILS radios one). Some save fuel, while others reduce noise by weaving around neighborhoods. Smaller planes will be able to coast over the “wake turbulence” caused by engines ahead of them and land on shorter stretches of runway. The savings add up quickly.

6. Extending the Runway

The advantages of GBAS become more visible when the runway is not. With ILS, air-traffic control spaces planes more widely to account for its imprecision. Taxiing planes must also scoot back from the end of the runway to avoid interfering with radio beams. Honeywell estimates airports lose up to 25% of capacity during bad weather. GBAS renders moot all these causes for delays.

I.D.  |  November/December 2008

Heirport

Eero Saarinen's TWA terminal has a new neighbor that embodies the realities of 21st-century air travel.

image

JetBlue Airways Terminal 5
Queens, New York
Designed by Gensler, Arup, and Rockwell Group
www.gensler.com

Pity the Gensler architects who were handed the task of building JetBlue a new terminal at New York’s John F. Kennedy International Airport, when the most iconic and beloved terminal of all time is practically sitting on its front lawn. For decades, Eero Saarinen’s 1962 TWA Flight Center was the standard against which the aesthetic merits of all other airports were judged. His swooping bird-of-prey structure has since been trumped by Sir Norman Foster’s lofty cathedrals in Hong Kong and Beijing—the world’s largest buildings under one roof. Each of those terminals is designed to handle more passengers in a year than the entirety of JFK, and each boasted price tags running into the billions. They are everything Gensler’s terminal is not: monuments to national pride, the bellows of worldwide commerce, and the heartthrobs of critics everywhere. “Our architecture,” Saarinen once said, “is too humble. It should be prouder, much richer, and larger than we see it today.” People listened, albeit only in the East.

This is no fault of Gensler’s, or of its partners on the project—the engineering wizards of Arup and the consummate showman David Rockwell. The trio executed their brief to the letter, constructing a handsome, efficient, and value-engineered-within-an-inch-of-its-life steel box embodying the new realities of American air travel. It is the first true post-9/11, post–cheap oil terminal, and its priorities point toward a kinder, gentler experience than the toxic mix of frustration, despair, and rage that has prevailed for the last seven years. The partners have eschewed the “hardware” of monumentalism for the “software” of better food, bigger bathrooms, and public theater. The real question is whether it can withstand the grind of 20 million footfalls each year. Saarinen’s masterpiece couldn’t.

Greg Lindsay, on the scene at JetBlue’s Terminal 5.

The new terminal’s low, sloping roofline keeps its head down in a show of deference to the lawn ornament out front. “We never wanted to compete with Saarinen,” Gensler’s principal architect William D. Hooper told me during a tour. (As if that legacy weren’t intimidating enough, JetBlue’s previous center of operations—Terminal 6—was designed by I.M. Pei.) The fallopian tubes between Saarinen’s Flight Center and its vanished departure halls have been preserved, although they now end awkwardly in stairwells stuck between the ticket hall and baggage claim.

The vast majority of passengers will arrive by car or cab, anyway, entering the hall with boarding passes and carry-on luggage already in hand. As such, the ticket counters and kiosks have been shunted to the sides, leaving the security checkpoint to dominate the room. Gensler stacked 20 lanes end-on-end to create the largest single checkpoint in the world. It’s a brute-force (but effective) solution to lines elsewhere seen only at Disneyland. And in a pair of nods to the Transportation Safety Administration’s shoe-phobia, the checkpoints’ floors have a rubbery, stocking-friendly texture, while a 225-foot-long bench awaits half-undressed travelers on the opposite side.

Once osmosis has carried them through the security membrane, travelers enter David Rockwell’s domain, i.e., “the Marketplace.” “The nexus of the terminal,” in Rockwell’s words, is a hub of shops and restaurants, including a truly ambitious lineup of brasseries, trattorias, sushi joints, and tapas bars. Before JetBlue, no one had attempted a white-tablecloth restaurant at JFK since the Raymond Loewy–designed coffee shop in Saarinen’s terminal. But as airport “dwell times” have soared since 9/11, sit-down meals have become viable again.

David Rockwell on the viability of the “Marketplace.”

Rockwell’s personal contributions are a chandelier of flat-screens floating above a grandstand where idling departing passengers will be able to watch the eternal stream of new arrivals. Rockwell went all the way back to William Whyte’s pioneering studies of human traffic in public spaces to create the layout and placement of his grandstand, which doubles as a traffic funnel.

Once past the Marketplace, the terminal is more prosaic—artfully, purposefully so. “Everything is done with an eye toward usefulness,” Hooper told me, like the special slurry of scuff-camouflaging terrazzo in the halls, or the virtually indestructible blue carpeting that just might outlast the terminal. The only razzle-dazzle is provided by workstations at each gate from which passengers will be able to order food for delivery—an eye-opening innovation with the potential to be a customer-service disaster at peak hours.

But the most crucial feature of all, at least from the airline’s perspective, is one that will likely go unnoticed by most passengers. Small closets stocked with cleaning supplies have been placed at each gate; the faster JetBlue can wipe down its planes, the faster it can reload and get them back in the air, saving money lost to delays and increasing each flight’s efficiency. The same impulse is behind the terminal’s dual taxiways, allowing one plane to slip into a gate while another is pulling out. These may sound like small things, but they’re the blocking-and-tackling on which a profitable airline is built—just ask Southwest, JetBlue’s spiritual progenitor, which has turned a profit every quarter since 1973.

JetBlue hasn’t been so lucky. Buffeted by historically high oil prices, it posted a $7 million loss in the second quarter of 2008, as opposed to a $21 million profit the year before. It sold nearly a fifth of itself to Lufthansa for $300 million, then chipped in almost a third of that to cover the cost of building its terminal. JFK’s owner, the Port Authority of New York and New Jersey, covered the rest of the $743 million bill. This is all a way of saying no one will ever build a terminal quite like Saarinen’s again, at least on these shores, because no one can afford to. In the meantime, treat yourself to a panini the next time you’re passing through. Your flight probably isn’t leaving for another two hours.

Fast Company  |  May 2008

Medical Leave

Your next heart surgery could well be in Bangkok -- but don't worry, it'll be "in network." How your health care is taking wing ...

Medical Leave, by Greg Lindsay

“This doesn’t look like a hospital,” says Ruben Toral, showing me around. “It feels more like a hotel or an upscale mall.” After studying the gleaming lobby of Bumrungrad International for a minute or two, I’m inclined to agree. Americans in shorts recline across from Arab couples in flowing white dishdashas and black abayas, the latter accessorized with designer handbags and sunglasses. We’re in Bangkok in August, when even the asphalt is overripe and malodorous, but the only scent inside is a faint whiff of espresso from the Starbucks in the corner.

Toral is responsible for luring that cosmopolitan clientele here, thousands of miles from home, for a knee replacement or a triple bypass or even just a checkup. Before he arrived in 2001 as Bumrungrad’s marketing director, “we were a Thai hospital serving a Thai community,” he says. “Now we’re an international hospital that just happens to be in Thailand.”

Toral himself just happens to be a dead ringer for George Clooney, and he tells his story in similarly seductive tones. He’s still amazed, seven years later, that folks who have never set foot on a plane, let alone owned a passport, will log a 24-hour flight—in coach!—to put themselves in the care of a hospital whose name they can’t even pronounce. Overseas patients have more than doubled on his watch, to 430,000 in 2006, generating the majority of the privately owned hospital’s revenue. “It’s the high-school-cafeteria person,” Toral says. “The independent businessman, the doctor, the lawyer. They tell me, ‘We did the math. We can’t afford to pay $1,200 for insurance every month.’”

The phrase “medical tourism” was once used to describe early retirees jetting in to Bangkok or Bangalore to have a little work done before recuperating on the beach. That image doesn’t jibe with the numbers today. As many as half a million Americans streamed abroad last year in search of affordable alternatives for hip replacements or prostate surgery. And they went not for the postsurgical tanning but for the savings: up to 90% off the going rates in the United States. They went because 47 million Americans lack insurance and can’t pay for surgery to fix a bad back or clogged arteries. Or because they have insurance but can’t begin to pay the soaring deductibles a major surgery entails. They’re fleeing a system that is by far the most expensive in the world and growing more so by the hour, with diminishing returns in quality of care.

“Your options are paying $50,000 to $60,000 in the States or coming here and paying $8,000,” says Toral, an American raised in North Carolina. “That’s the difference between putting it on your credit card or going into bankruptcy.”

A journey to Bumrungrad is hardly a descent into some third-world medical hell. It was arguably a world-class hospital even before it became a world-famous one (thanks in large part to a 60 Minutes segment in 2005 orchestrated by Toral). Administrators have spent the past 15 years acquiring state-of-the-art technology, adding beds, and wooing Thai doctors abroad to come home. Bumrungrad replaced its paper records seven years ago with a homegrown, all-digital system, an upgrade U.S. hospitals have struggled with for years, despite the assistance of giants like Cerner, Siemens, and General Electric. (Replacing prescription pads with tablet PCs is harder than you’d think, which might explain why last year Microsoft bought the company that designed Bumrungrad’s software. Toral now works for Bumrungrad in an advisory role; he has struck out on his own with MedNet Asia, a software startup helping insurers handle paperwork.)

The hospital’s outpatient clinic is more stylish than the bar at my five-star hotel. Instead of waitresses, some two dozen nurses tend to a polyglot mix of patients. Arrivals from Asia or the Middle East have separate floors to make them feel at home. There’s an in-house travel agency offering visa extensions in case they suddenly need to stay. Modernizing late offered Bumrungrad a chance to leapfrog the competition and build the world’s first truly global hospital.

But the Arabs sprawled across its lobby aren’t oil sheikhs awaiting VIP treatment. They’re humble civil servants, shipped in bulk from Riyadh and Dubai because Toral cut a deal with their governments to outsource their care to Bumrungrad. Medical tourism, Toral explains, is only the beginning. The next step is globalized medicine, in which millions of fully insured patients here in the United States are connected to hospitals in Bangkok, Singapore, and India. The patients will belong to Blue Cross Blue Shield, UnitedHealth Group, and maybe even your insurer. If Toral has his way, Bumrungrad’s next heart- or knee- or brain-surgery patient will be you.

And if all this sounds a bit outlandish, brace yourself: The big insurers are already looking into it. “Once they understand the ramifications of this, you’ll see the larger players start crafting policies that allow people to receive treatment overseas,” Ori Karev, CEO of UnitedHealth International, the global arm of the UnitedHealth insurance conglomerate, told me. “I think you’ll find most of us exploring this. We are a business at the end of the day.”

Toral is an outsider twice over. Not only is he a foreigner in a Thai hospital, but he’s neither doctor, operator, nor administrator. That may explain his near-total lack of empathy for the panic or anger those professionals would feel upon hearing his chilling vision of their future.

He only came to medicine after a stint consulting with Duke University’s Center for Living, arriving in Thailand 15 years ago to set up “health and wellness” retirement villages for Westerners. That may explain his idea of health as a lifestyle choice, as opposed to a total war against death and disease. Health care, in his mind, is not necessarily a social compact or a universal right, but a quality product to be packaged and sold at a sensible price; he assumes patients are much savvier consumers than their doctors give them credit for.

Annual health-care spending in the United States has topped $2 trillion—about half from private sources, half from public coffers—to comprise a staggering 15% of GDP. That’s almost double the average of other developed countries (9%) and more than half of global spending overall. That figure will only keep climbing, perhaps exponentially, as 80 million baby boomers, the so-called silver tsunami, begin to reach old age over the next 25 years. Their needs alone could keep every doctor from Boston to Bangalore gainfully employed for half a century, and a shocking percentage lacks insurance (or any real guarantee that Medicare will still be around when they reach qualifying age). As Toral puts it, a little indelicately: “God forbid you have a family of four, earning $50,000 a year. You are fucked.”

Some economists have hailed our extreme health-care spending as the central pillar of a postglobalization economy built around services. In their view, hospitals and their support systems of doctors, administrators, and insurers have been, and will continue to be, the greatest creators of domestic jobs this century—nearly 2 million so far—especially in the Rust Belt and other areas hit hard by manufacturing’s migrations. Yet when McKinsey consultants dug into health-care costs last year, a research team concluded there were no real incentives for either hospitals or consumers to think hard about the ultimate price of treatment. Even adjusting for our higher per capita incomes, we’re still overpaying by $477 billion a year, McKinsey concluded. At the same time, the United States ranks just 37th in the World Health Organization’s list of the world’s best health systems—behind such medical hubs as Singapore and Costa Rica, and only 10 spots ahead of Thailand.

For someone such as Toral, the hypertrophied medical-industrial complex is just begging for a dose of disruptive innovation. He calls his vision the “Toyota-ization of health care,” a metaphor so vast that it contains multiple readings, some fit for industry conferences and others he’ll cop to only in confidence. In Toral’s view, medical tourism as we know it is already giving way to “globalized health care.” Hospital chains at home will buy, partner with, or even sell out to foreign rivals like Bumrungrad, creating worldwide networks of patients who will hopscotch across continents chasing the best care and costs. Insurers will leap at the chance to lower their own bills and offer members more options. And employers, dying to do the same, will induce employees to play ball by kicking back a share of the savings.

We’ll learn to love surgery overseas, Toral insists, just as we came to prefer Toyota Camrys to Chevys. Nevermind that globalization of the auto industry gutted Detroit; it gave us cheaper, safer cars and helped lift Japan and South Korea into the ranks of first-world nations. Toral believes globalization will do the same for our health care (and quite possibly for India and Thailand). “Medicine has always been so locally driven that it can’t think out of the box and ask, How does this globalize?” he complains while we watch translators, collectively fluent in two dozen languages, admit patients into Bumrungrad. “What it’s looking at right now is the beginning of the beginning, which is individuals who are franchised, voting with their feet and heading out of the country.”

The process will pick up speed as heavyweight for-profit U.S. hospital chains such as HCA ($26.8 billion in revenue), Tenet Healthcare ($8.8 billion), or HealthSouth ($1.7 billion) realize that hospitals such as Singapore’s Parkway Group or India’s Apollo chain aren’t competitors so much as links in a global, offshore supply chain that can be bought and brought into the fold just as easily as a Toyota or GM plant. Medical tourism hubs will become different stops on the same assembly line: Brazil and South Africa for plastic surgery; Mexico and Hungary for dentistry; Costa Rica for a little of both; and Southeast Asia for the bodywork of heart surgery, organ transplants, and orthopedics. Patients needing new hips or hearts will be the first sent overseas by their doctors for the same reason medical tourists are headed there now: The procedures are safe, low margin, and high volume—always the first things to go in any globalization scenario.

“There are going to be primary-care networks and emergency care, and then there are going to be surgical centers offshore,” says Toral, laying it all out for me over dinner one night in Bangkok. “And the great thing is, [American companies] are going to own them!

“In order to ensure continuity of care,” he goes on, “you’ll never leave the system. What could be better than telling an American patient they’re going overseas to an American-owned hospital? They’re going to discover the same supply-chain advantages Toyota did when it created just-in-time manufacturing. We’re going to have the same thing—just-in-time patients. Hospitals are not going to spend any more money or any more time in the movement of that patient through the system than is necessary. They’re going to get the patient in, get them on that global platform, and get them back. Now, how do they do that in a fast, efficient way where quality is kept, efficiency is gained, and prices don’t go up? It’s classic manufacturing and logistics.”

Despite Toral’s enthusiasm, it’s unclear who will come out on top in a global wave of consolidation. There are precedents for U.S. companies owning hospitals abroad: Tenet went on a building and buying spree across Asia and Australia through the 1980s and early 1990s, until it sold off its holdings in the wake of a merger at home. (Toral’s boss at Bumrungrad, group CEO Curtis Schroeder, was the Tenet exec who oversaw its 40% stake in the hospital back then.) And the trend continues with top-tier U.S. medical schools (and global brands) such as Harvard and Johns Hopkins cutting deals to open dozens of hospitals and teaching programs abroad. Harvard now has partners in Mumbai, Seoul, Istanbul, Xinjiang, and Islamabad, to name a few, but its most ambitious creation by far is Dubai Healthcare City, a state-of-the-art complex staffed with the best equipment and doctors the ruling sheikh’s money can buy. It’s the brainchild of Dr. Robert Crone, former head of Harvard Medical International and now a managing director with the Huron Consulting Group in Chicago. “Institutions within the U.S. health-care system will have to think very creatively about how they can participate on a global basis,” Crone told me. “The magic formula hasn’t been developed yet.”

The competition will be fierce. While I was in Thailand, the new CEO of the Bangkok Hospital (Bumrungrad’s cross-town rival) mentioned he was interested in gaining a toehold in the States in order to guarantee a steady stream of patients: Give someone like him the sheikh of Dubai’s money, and you might see sovereign wealth funds snatching up medical expertise much as China has been buying up our scrap metal.

Even if the roles of hunter and hunted have yet to be defined, there are clear winners and losers in Toral’s scenario, which he sees unfolding over the next five years. The biggest losers by far would be American doctors—especially cardiac and orthopedic surgeons—who face the most damaging blow yet to their pride, public standing, and paychecks. In one fell swoop, they’d devolve from the rock stars of the OR to glorified mechanics, and they’d really only have themselves to blame. Overseas patients routinely return home raving about the personal attention shown by their Thai or Indian surgeons. Even before arriving, patients can trade phone calls and emails with doctors. (Nothing punctures the myth of American medical invincibility quite like the experience of having a doctor who actually speaks to you.)

Foremost among the winners would be the forward-thinking hospital groups and their shareholders—in both hemispheres. They stand to profit enormously from the dismantling of an immense cost base on one side of the Pacific and its subsequent reconstitution as a streamlined profit center on the other. McKinsey tentatively estimates that maybe 10% to 20% of America’s 39 million total hospital patients last year would have been well suited for transoceanic care. With a little back-of-the-envelope math that assumes those patients’ surgeries would have cost $50,000 here, the top end of McKinsey’s estimate yields an annual drain (or savings, depending on how you look at it) of $390 billion, more than the current GDP of Singapore. Also sitting pretty would be expat doctors, who would be free at last to return home from the States to practice world-class medicine, letting their patients come to them.

Yet another beneficiary would be the middlemen assisting in the care and feeding of globalization’s newest nomads. Already, companies like IndUShealth have emerged as one-stop shops for curious employers, employees, and the self-employed (or unemployed) by offering a service that’s part quality control, part travel agent—all-inclusive package deals with airfare, hotels, a medical case manager, and even the cost of the care itself. “We offer an advantage in not being aligned with any hospitals,” says IndUShealth CEO Rajesh Rao. “We tend to be more customer-centric.”

Toral’s entire road map, of course, is predicated on insurers’ willingness to underwrite it, and there are plenty of signs they will. For starters, there’s UnitedHealth’s Karev, who took time out from speaking at one of Toral’s medical-tourism conferences this past winter to share the establishment’s thinking. “It’s not just about the cost,” he explains. “Quality is a major issue—the quality of care, the documentation, the delivery.” UnitedHealth is now working with Toral to offer plans listing Bumrungrad and other hubs as in-network for big-ticket items.

There’s also Aetna with its 37 million members, which last year acquired Goodhealth Worldwide, an overseas private insurer. CEO Ronald Williams said at the time that offshore medicine “will be an important emerging trend,” and pondered, “How will it emerge, what are the opportunities, and how do all the capabilities we have add value to it?” Since then, Aetna has green-lighted a pilot project for one customer to begin sending its employees abroad (if they so choose) for knee and hip replacements. “We’re expecting everything to go well,” says Aetna’s national medical director, Charles Cutler.

But if insurers will be delighted to cut costs while adding more options, and employers will be equally pleased to see the same trickle down to them, the question remains: What about the patients?

Doctors in Thailand and India are arguably out-dueling their Western counterparts right now when it comes to better care. That may sound like sacrilege, but the bar is set lower than you think: More than 100,000 people die each year in U.S. hospitals from preventable errors alone, more than those who fall to AIDS, breast cancer, and car crashes combined. At Bangkok Hospital’s three-year-old heart clinic—really a hospital in its own right, treating some 15,000 outpatients a year—stem-cell therapy is already part of the standard tool kit for treating battered hearts that might otherwise demand a transplant. “Most of the patients have been ill for a long time,” the clinic’s director, Dr. Kit Arom, told me in his art-strewn office. “By the time they come here, they are all but incapacitated. They are waiting for a transplant or waiting to die.” After receiving stem-cell injections straight into cardiac muscle tissue—a treatment too controversial to be offered yet in the United States—most patients recovered enough to leave under their own power. On Arom’s watch, the clinic has also retired open-heart surgery in favor of a new, decidedly less invasive approach using small incisions. Huron Consulting’s Crone, having also seen the procedure performed in Bangalore, enthusiastically notes its “extremely low morbidity rate, and the patients are literally out of the hospital in a couple of days. It’s this kind of innovation—done with well-trained, U.S. board—certified surgeons in a less oppressive environment—that yields the potential for better health care than there is in the United States currently.” Arom is more succinct: “It’s a question of will.”

Will patients embrace that perspective and agree to travel for their care? “They don’t—and we don’t—want to be in a situation where an insurer says, ‘You have to go,’ ” says Victor Lazzaro, CEO of the packager BridgeHealth International and a former executive at Prudential. “The days of ‘Mother may I?’ medicine are over, and that’s a good thing.” One solution is to be up front with patients about the true cost of their treatment and offer to share the savings with them. In light of what it costs for a fresh set of knees in the States—$45,000 and up for the uninsured—and the huge discounts overseas, it’s conceivable that patients might come out ahead if they let a Thai doctor install them. Of course, just because insurers won’t use a stick doesn’t necessarily mean the dangling carrot couldn’t be considered coercion in its own right.

That’s one lesson learned from the first would-be U.S. corporate pioneer in globalized medicine, one with plenty of arrows in its back. Blue Ridge Paper Products manufactures milk cartons at its original plant set in its namesake mountains; its VP of HR, 26-year veteran Darrell Douglas, discovered medical tourism the same way millions of Americans did—by watching Toral’s handiwork on 60 Minutes.

“My ears perked up when I heard the prices,” Douglas says, because the average annual health-care cost for Blue Ridge’s 2,000 or so aging employees had doubled to $9,500 in just five years. “Every time we made a move to control costs, the provider community”—read: doctors and hospitals—“would make a countermove to protect their revenue stream.” His interest was piqued enough to create a task force to study the options. One of its members was a then-60-year-old technician named Carl Garrett. In short order, Garrett nominated himself, Dick Cheney—style, to be the company’s first guinea pig, to travel to India to fix a worn rotator cuff and have a few gallstones removed. “He was our poster child,” says Douglas, who has since left the company. “He took it upon himself to do the research, came to us, and said, ‘I want to go to India. Will you allow me to go and share the savings with me if I do?’ “

Douglas agreed, on the condition that Garrett sign a waiver absolving Blue Ridge of all responsibility. (Needless to say, New Delhi was considered “out of network.”) IndUShealth was hired to find a hospital and make arrangements; a plan was laid for Garrett to fly round-trip, stay in five-star hotels when he wasn’t in the hospital, and himself receive 20% of the savings, up to $10,000. There was only one catch: Garrett’s union, which called at the eleventh hour to squash the plan. Splitting the savings with Garrett constituted nonnegotiated compensation, the union contended. Garrett ultimately backed away from the controversy, choosing another surgeon here at home.

But the battle had been joined. The union president, Leo Gerard, sent a letter to every member of Congress declaring, in part, “The right to safe, secure, and dependable health care in one’s own country should not be surrendered for any reason, certainly not to fatten the profit margins of corporate investors.” A blog on the AFL-CIO Web site covered the debacle with the headline, “First Employers Sent Your Job Overseas. Guess What? You’re Next.”

“The problem with exporting people for health care is: Who goes?” says Stan Johnson, the union’s Southeast director, his old-timer’s drawl coming across loud and clear. “Is it voluntary now? Is it involuntary at some point? Do you end up sending your 80-year-old mother to India when she has never been sent outside of a 50-mile radius from home? You’re going to put her on a plane and ship her to a hospital where they don’t understand her language or her culture and where conditions may be suspect?”

I ask Johnson if he thought someone like Toral was being disingenuous, or merely deluded, when he claimed medical tourism could go a long way toward fixing health care. “Either or both,” Johnson replies. “There are clearly people who see a significant opportunity from a monetary perspective. There are also people who think that competition is just the thing to fix the system. But I can without a doubt say they are not seeing the bigger picture.”

Toral, naturally, sees something else at work in this kind of thinking. “Protectionism and slander,” he declares, during a prescient rebuttal of Johnson’s points, months before. “If you change the health-care equation, they are going to mobilize. You want a Chinese doctor working on you? You want an Indian doctor working on you? Can you trust these people? Of course, those doctors studied in your schools and speak your language, and they already mastered their medical system. Now they’ve mastered yours.”

“They say, ‘It’s outsourcing, you’re trying to drive [patients] out,’ ” Toral says mockingly. “Well, I’m not trying to drive them out; the American system is driving them out! My product is just as good as it was 5 or 10 years ago. The only thing that has changed is you. You’re now unaffordable, unreachable, and you’ve got 47 million uninsured. So you do the math.” At one particularly effusive moment during our dinner in Bangkok, Toral announces that a patient pipeline flowing from the United States to Bangkok or Singapore and back would galvanize practitioners and clue Americans in on the most intractable cost problem facing the industry today: the aggregate expenses of surgery, hospitalization, and administration. “Right there, you’ve saved maybe 40% of the total cost,” he says, “and all of a sudden the pressure to overhaul the U.S. health-care industry is off you, because you’ve solved the most vexing problems out there.”

But can a free-market solution actually produce meaningful change, measured in terms of more care, better care, and lower costs? Toral is right to insist that the 24-hour flights, the Indian doctors, and the hospitals with unpronounceable names are red herrings; the real issue is whether these choices will eventually fix the system or simply extend it around the planet. But Johnson also is right: The recent history of health care is marked by elective improvements that soon enough hardened into the status quo. “Before this, there was ‘first dollar’ coverage,” Johnson says, ticking them off. “Then there was the ‘miracle’ of HMOs, all of which were voluntary, and all of which quickly morphed into something quite less. It was the same thing with PPOs, and every new gimmick the health-care community can come up with.” Will the promise of cash prizes go away, replaced by implied threats? Will our choices simply disappear?

It’s hard to imagine how the insurers—operating in the same Hobbesian universe as the rest of us—won’t eventually winnow the choices down to having our care paid for in Bangkok or making us cover it if we opt to stay close to home. It’s hard not to notice that their argument seems to boil down to, “Trust us.”

The odds are good that the future of health care in this country will not be mapped by a grand visionary in government or some grim actuary buried at the bottom of an insurance conglomerate. It will more likely be the sum of many thousands of decisions made by well-meaning employers in places that look a lot like Myrtle Beach, South Carolina.

The morning I was in Washington, D.C., to meet UnitedHealth’s Karev, I also had coffee with David Boucher, an early-rising bureaucratic do-gooder at Blue Cross Blue Shield. Boucher is an Army brat with inexhaustible energy and laserlike focus. He’s no radical, however, having started at Blue Cross Blue Shield of South Carolina while still in grad school. He later left to run a few hospitals before returning in 1999 to oversee a BCBS call center. And yet, Boucher has done more than Karev and Toral combined to make global medicine a reality, at least for his 1.5 million members in the Palmetto State.

His Saul-on-the-road-to-Damascus moment came in the summer of 2006, when he and his wife elected to take their summer vacation at Bumrungrad. He had been tipped that it was the foreign hospital to see, and so they reserved an apartment at the Bumrungrad Hospitality Suites (normally reserved for recovering patients) and proceeded to take in the sights. By day, he toured the hospital’s ER, ORs, and ICUs before dining at one of the hospital’s various restaurants each evening. The eureka moment came as they were leaving, when his wife (evidently still on speaking terms) offered this non sequitur: “If I or anyone in my family needs an operation, we’re coming here.”

“Women make the decisions about health care in families,” Boucher says over coffee. “If my wife felt comfortable about sending a loved one there, then I thought there might really be something to this.” Once he was back in the office, he proposed launching a medical travel agency under the banner of BCBS, which compared to its hidebound siblings in other states is run like a pirate ship. “Thinking outside the state wasn’t unusual for us but outside of the country was,” he says.

His bosses gave him the go-ahead last winter to start Companion Global Healthcare, a one-stop shop for members heading overseas to make appointments, choose hospitals, and handle the travel arrangements. Bumrungrad was the first hospital to receive its seal of approval, a list that now includes Anadolu Medical Center in Istanbul (a Johns Hopkins partner), Costa Rica’s Hospital Clínica Bíblica, and a trio of Parkway Group hospitals in Singapore. Anyone expecting an explosion of patients would have been disappointed; Companion pulled in only three in its first year. Boucher just shrugs. “We’re neither surprised nor discouraged with the volume of patients,” he says. “We’re not even a year old at this point, and our primary markets are employers and brokers,” two parties that need plenty of handholding and time to make decisions.

A month later, he invited me down to Myrtle Beach to meet one of his argonauts bound for Bumrungrad, a local civil servant named Mike Shelton. Meeting Shelton in an anonymous conference room, I was immediately struck by his sheer normalcy—a roly-poly everymensch with a soft, almost tremulous voice, thinning brown hair, and glasses. He reminded me of no one so much as a less squirrelly Milton, the put-upon mascot of the movie Office Space. If his was the face of globalized medicine, then any one of us is liable to end up on a Bangkok operating table.

As it turned out, Shelton’s motivation wasn’t strictly personal. He happens to be the budget director for the City of Myrtle Beach, one of the key decision makers in whether the city’s 800 employees, half as many dependents, and a burgeoning number of retirees will sign up with Boucher for similar trips. “Incorporating that into your plan is a bit complex,” Shelton confesses, “because when you first say, ‘Let’s send you over to Thailand for medical care,’ you don’t quite get the warm and fuzzy reaction you’d like. It’s more like, Do what?!”

But it’s not as if he (or they) have much of a choice. Shelton’s being squeezed by a new federal mandate, one that demands the city bring its costs in line with for-profit companies of comparable size. The acid irony of a public agency forced to scrap and scramble like a private enterprise isn’t lost on him. But he hopes that by agreeing to outsource himself and his colleagues, they’ll be able to keep major procedures such as spinal surgery and hip replacements in-network, rather than see them dumped from employees’ plans completely.

During a fact-finding mission in February, Shelton took one for the team by scheduling his regular colonoscopy at Bumrungrad. Although routine, it’s still (quite rightly) considered “invasive” surgery and priced accordingly. His last one cost $3,500, almost a third of which he paid out of pocket. This time, he’d been given a quote of $750 from Bumrungrad, a savings of nearly 80%. (The higher priced the procedure, obviously, the easier it is to absorb travel and other expenses. But this was a scouting trip, and Myrtle Beach picked up the tab.)

Staggering off a plane in Bangkok after a full day in the air, Shelton was met at the gate by the hospital’s welcoming committee. They took his bags, checked him in for surgery, and drove him to the Bumrungrad Suites. He met his doctor the next morning, a young Thai who spoke excellent English. The ratio of nurses to patients, he noticed, was almost 1:1. Before he left, he had warned me, “If I start to feel too weird about it, I’m free to go,” but his colonoscopy started early and went smoothly; he checked out the same afternoon.

Sitting comfortably back in his office in Myrtle Beach, Shelton says he wouldn’t hesitate to return. Even for a $60,000 surgery? Sure, he said. What’s more, savings on this scale would keep these surgeries available to his neediest employees, those who might have gritted their teeth through the pain rather than pay to go under the knife. In short, he’s giving Bumrungrad his stamp of approval. Barring any unforeseen fallout from the city council, Myrtle Beach employees will soon find themselves at the forefront of globalized medicine.

I ask Shelton what he would say to the Stan Johnsons of the world, the ones who doubt the quality and intentions of a Bumrungrad or Apollo or Parkway. He pauses a minute before answering. “Let’s face it; we tend to have the idea we’re the best in the world. And maybe in some ways we are, and in some ways we’re not. But certainly from what I’ve seen, I don’t have the same impression that fellow had.”

This is how it will begin—with a crying need, with curiosity, and with the desire to see a place like Bumrungrad with one’s own eyes. We’ll make the trek once, or someone will make it for us, and word will spread that it’s unlike anything we’ve seen at home ... it’s better. And then we’ll start to go. They’re already leaving Myrtle Beach, and soon you’ll be there too.

Fast Company  |  May 2007

Flight Plan

The math wizards at Dayjet are building a smarter air taxi--and it could change the way you do business.

Flight Plan, by Greg Lindsay

It’s only fitting that a service pitched to traveling salesmen should find itself confronting an especially nasty version of what’s known as the “traveling-salesman problem.” Stated simply: Given a salesman and a certain number of cities, what’s the shortest possible path he should take before returning home? It’s a classic conundrum of resource allocation that rears its ugly head in industries ranging from logistics (especially trucking) to circuit design to, yes, flesh-and-blood traveling salesmen: How do you minimize the cost and maximize your efficiency of movement?

Back in 2002, that was the question facing DayJet, a new air-taxi service hoping to take off this spring. Based in Delray Beach, Florida, DayJet will fly planes, but its business model isn’t built around its growing fleet of spanking-new Eclipse 500 light jets. It’s built on math and silicon, and the near-prophetic powers that have in turn emerged from them. “We’re a software and logistics company that only happens to make money flying planes,” insists Ed Iacobucci, an IBM veteran and cofounder of Citrix Systems, who started DayJet as his third act.

The advent of affordable air taxis has been heralded by a steady drumbeat of press over the past few years, with an understandable fixation on the sexy new technology that’s generally credited with making the market possible: the planes. The Eclipse 500 is a clean-sheet design for a tiny jet that seats up to six and costs about $1.5 million (the Federal Aviation Administration may clear it for mass production as early as next month). It is also the most fuel-efficient certified jet in the sky. Cessna, meanwhile, has rolled out its own, if pricier, “very light jet” (VLJ), with Honda’s set to appear in 2010. No less an authority than The Innovator’s Dilemma author and Harvard Business School professor Clayton Christensen has mused in print that the E500 and its ilk “could radically change the airline industry” by disrupting the hub-and-spoke system we all know and despise.

But Iacobucci, who wrote a check long ago for more than 300 orders and options on Eclipse’s first planes, isn’t relying on the aircraft to make or break him. Instead, it’s his company’s software platform—and the novel way it attacks the traveling-salesman problem—that will set DayJet apart. On day one of operations, flying from just five cities in Florida with only 12 planes, DayJet’s dispatchers will already have millions of interlocking flight plans to choose from. As the company’s geographic footprint spreads (with luck) across the Southeast—and as its fleet expands as well—the computational challenge only gets worse. Factor in such variables as pilot availability, plane maintenance schedules, and the downpours that drench the peninsula like clockwork in the summer, and well, you get the idea: Finding the shortest, fastest, and least-expensive combination of routes could take every computer in the universe until the end of time.

“I knew what the complexities were and how the problem degenerates once you reach a threshold,” Iacobucci says. So he didn’t try to find the optimal solution. Instead, DayJet began looking for a family of options that create positive (if imperfect) results—following a discipline known as “complexity science.”

For the past five years, with no planes, pilots, or customers, DayJet has been running every aspect of its business thousands of times a day, every day, in silicon. Feeding in whatever data they could find, Iacobucci and his colleagues were determined to see how the business would actually someday behave. When DayJet finally starts flying, they’ll switch to real-time flight data, using their operating system to shuttle planes back and forth the way computers shuttle around bits and bytes.

Iacobucci is an expert at building operating systems—he did it for decades at IBM and Citrix. Because of that, he has zero interest in the loosey-goosey world of Web 2.0. He sees the next great opportunities in business as a series of operating systems designed to model activities in the real world. DayJet looks to be the first, but he has no doubt there will be others, and that new companies, and even new industries, will appear overnight as computers tease answers out of previously intractable problems.

Which brings us back to the traveling salesmen. Iacobucci says his computer models predict that DayJet’s true competitors are not the airlines, but Bimmers and Benzes—he says 80% of his revenue will come from business travelers who would otherwise drive. In other words, DayJet, which closed an additional $50 million round of financing in March, is creating a market where none exists, an astonishing mathematical feat. To get there, all Iacobucci needed was five years, a professor with a bank of 16 parallel processors, two so-called Ant Farmers, and a pair of “Russian rocket scientists” who, it turns out, are neither Russian nor rocket scientists.

“This is way nastier than any of the other airline-scheduling work we’ve ever done,” says Georgia Tech professor George Nemhauser, whose PhD students have been helping to map the scope of DayJet’s mountain-sized scheduling dilemma. “You can think of this as a traveling-salesman problem with a million cities, and that’s a problem DayJet has to solve every day.”

Tapping into the school’s computing power, Nemhauser and his students have figured out how to calculate a near-perfect solution for 20 planes in a few seconds’ worth of computing time and a solution for 300 planes in 30 hours. But as impressive as that is, in the real world, it’s not nearly enough. That’s because in order for DayJet’s reservations system to succeed, Iacobucci and company need an answer and a price in less than five seconds, the limit for anyone conditioned to Orbitz or Expedia. Because DayJet has no preset schedule—and because overbooking is out of the question (DayJet will fly two pilots and three passengers maximum)—any request to add another customer to a given day’s equation requires its software to crunch the entire thing again.

One of Iacobucci’s oldest pals and investors, former Microsoft CFO and Nasdaq chairman Mike Brown, pointed him toward a shortcut—a way to cheat on the math. Brown had retired with his stock options to pursue his pet projects in then bleeding-edge topics such as pattern recognition, artificial intelligence, nonlinear optimization, and computational modeling. His dabblings led him first to Wall Street, where he invested in a trading algorithm named FATKAT and eventually to Santa Fe, New Mexico, ground zero for complexity science.

Invented by scientists at the nearby Los Alamos National Laboratory in the 1980s, complexity science is a gumbo of insights drawn from fields as diverse as biology, physics, and economics. At its core is the belief that any seemingly complex and utterly random system or phenomenon—from natural selection to the stock market—emerges from the simple behavior of thousands or millions of individuals. Using computer algorithms to stand in for those individual “agents,” scientists discovered they could build fantastically powerful and detailed models of these systems if only they could nail down the right set of rules.

When Brown arrived in town in the late 1990s, many of the scientists-in-residence at the Santa Fe Institute—the serene think tank dedicated to the contemplation of complexity—were rushing to commercialize their favorite research topics. The Prediction Co. was profitably gaming Wall Street by spotting and exploiting small pockets of predictability in capital flows. An outfit called Complexica was working on a simulator that could basically model the entire insurance industry, acting as a giant virtual brain to foresee the implications of any disaster. And the BiosGroup was perfecting agent-based models that today would fall under the heading of “artificial life.”

By the time Iacobucci mentioned his logistical dilemma to Brown in 2002, however, most of Santa Fe’s Info Mesa startups were bobbing in the dotcom wreckage. But Brown knew that Bios had produced astonishingly elegant solutions a few years earlier by creating virtual “ants” that, when turned loose, revealed how a few false assumptions or bottlenecks could throw an entire system out of whack. A model Bios built of Southwest’s cargo operations, for example, cost $60,000 and found a way to save the airline $2 million a year.

Brown proposed that Iacobucci supplement his tool kit with a healthy dose of complexity science. Iacobucci was already hard at work building an “optimizer” program that employed nonlinear algorithms and other mathematical shortcuts to generate scheduling solutions in seconds. But what he really needed, Brown suggested, was an agent-based model (ABM) that would supply phantom traveling salesmen to train the optimizer. Without it, he’d essentially be guessing at the potential number and behavior of his future customers. “Eddy took no convincing,” Brown says. “He was telling me, ‘Get some guys down here and let’s do this.’”

Brown dug up the Ant Farmers, a pair of Bios refugees and expert modelers named Bruce Sawhill and Jim Herriot. Sawhill had been a theoretical physicist at the Santa Fe Institute, while Herriot had been a member of the original team that invented Java at Sun Microsystems. Together, they’re DayJet’s own Mutt and Jeff, with Herriot playing congenial science professor and Sawhill his mischievous sidekick.

Meanwhile, to build the optimizer, Iacobucci recruited his pair of Russian rocket scientists: Alex Khmelnitsky and Eugene Taits, mathematical wizards he’d hired once before at Citrix. Rather than tackle every scheduling contingency via brute-force computing, the not-Russians cheated by slicing and dicing them into more manageable chunks. They used opaque mathematical techniques such as heuristics and algebraic multigrids, which elegantly subdivide a sprawling problem like this one into discrete patches that can be solved (within limits) simultaneously.

Ironically, the more they slaved over the problem, the less it seemed that throwing a perfect bull’s-eye every time was the key to their salvation. The speed of their solutions was proving to be more crucial. If they could provide DayJet with a minute-to-minute snapshot of near- perfect solutions, the system could essentially run the company for them. DayJet would become faster—both in the air and operationally—than any of its competitors could ever hope to be.

With one team working on modeling demand and the other calculating baroque flight plans, Iacobucci and his engineers then concocted a third software system called the Virtual Operation Center. The VOC runs the company in silicon, feeding the phantom customers inside the ABM into the optimizer, which does its best to meet each of their demands with optimal efficiency and maximum gain. Seen on-screen, the VOC is a time-lapse photograph of DayJet’s daily operations, also drawing upon maintenance and real-time weather information to produce a final data feed that factors in nearly every facet of the business. Iacobucci compares each run of the VOC with a game of baseball in which the ABM is continually pitching to the optimizer; DayJet has already played several thousand lifetimes’ worth of seasons.

Armed with its real-time operating system, DayJet is pursuing a very different idea of optimality than, say, the airlines. With their decades of expertise in the dark arts of yield management, the airlines know exactly how to squeeze every last dollar out of their seats, which is indeed pretty optimal. But they also lack an effective plan B—let alone a plan C or D—in the event that the weather intervenes and schedules collapse. In fact, while, say, JetBlue may now finally have a contingency plan or two, DayJet’s business model is nothing but contingency plans.

Herriot offers another sports metaphor: “Total soccer,” popularized by the Dutch in the 1970s, replaced brute-force attacks to the goal with continuous ball movement. “Moving straight to the goal is an excellent way to score, except for one slight problem—the other team,” Herriot says. “They’re a human version of Murphy’s Law. In total soccer, you continually place the ball in a position with not the straightest but the greatest number of ways to reach the goal, the richest set of pathways.”

“Each individual pathway may have a lower possibility of reaching the goal than a straight shot,” Sawhill chimes in, “but the combinatorial multiplicity overwhelms the other team.” The Dutch discovered that a better strategy was a series of good, seamlessly connected solutions rather than a single brittle one.

“The Dutch won a lot of games that way,” Herriot adds. “It also created a different kind of player, a more agile, intelligent one. In some sense, we’re teaching DayJet how to play total soccer.”

In complexity lingo, a chart of all the pathways those Dutch teams exploited would be called a “fitness landscape,” a sort of topographical map of every theoretical solution in which the best are visualized as peaks and the worst as deep valleys. “We’re dealing with a problem where the problem specification itself is changing as you go along,” Sawhill says. “You no longer want to find the best solution—you want to be living in a space of good solutions, so when the problem changes, you’re still there.” Fluidity is the greater goal than perfection.

To that end, the company has been changing the problem inside its simulators every day for the past four and a half years, looking for those broad mesas of good solutions. And after a million or so spins of the VOC, DayJet has produced a clear vision of the total market and its likely place in it. Iacobucci expects to siphon off somewhere between 1% and 1.5% of all regional business trips within DayJet’s markets by 2008, with “regional trips” defined as being between 100 and 500 miles. In the southeast states the company initially has its eye on, that’s 500,000 to 750,000 trips a year, out of a total of 52 million, more than 80% of which are currently traversed by car. Yes, DayJet’s life-or-death competition is Florida’s SUV dealerships, not the airlines. DayJet may even help the airlines slightly: The model predicts some customers who fly DayJet one way will take a commercial flight back home.

The reams of data produced by the VOC have already coalesced into a thick sheaf of battle plans framing best- to worst-case scenarios. And having run the scenarios so relentlessly for so long, Iacobucci is now utterly sanguine about his prospects. When I ask over dinner for the dozenth time about DayJet’s presumptive break-even number, he flat out admits there isn’t one. “Within the realm of all realistic possibilities—at least 25% of our projected demand to 125% demand—we maintain profitability.” Even at 25%? “Sure,” Iacobucci replies, “it just takes longer, and takes more [airports], and the margin is much lower. But this isn’t going to be what the venture capitalists call the ‘walking dead.’ If it’s a hit, it’s going to be a hit pretty quickly.”

I’m not the only one who has trouble wrapping his head around the numbers, or lack thereof. Iacobucci tells the story of one analyst asked to crunch the numbers ahead of an investment. “He asked a direct question: ‘All I want to know is, what formula do I put into this cell to tell me how you come up with a revenue number?’” Iacobucci says. “I told him, ‘There ain’t no formula to put in that cell! It can’t be done! We’ll sit you down with our modelers, who will explain the range of numbers we came up with, but they can’t be encapsulated in a spreadsheet.’” The would-be investors passed.

Not everyone is so put out by the math involved. Esther Dyson, the veteran technologist and venture capitalist, now runs an annual conference called “Flight School,” in which DayJet has played a starring role. “I have no doubt it will work,” she says, referring to the software, “and I have no doubt they will spend time refining it and that there will be glitches here and there. But I do think Ed knows how to design very highly available systems”—a reference to his days building operating systems—“and that’s exactly what they’re doing.”

Mike Brown, who did ante up and today sits on DayJet’s board, is convinced that businesses big and small will increasingly turn to modeling as a way of developing—or troubleshooting—their business plans, mapping out strategies and market expectations that go far, far beyond spreadsheets and PowerPoint decks. “We’ll see more and more companies integrate modeling into the heart of their business. This is just like the Internet: One day no one had heard of it, the next day we were all using it.”

Since Iacobucci sees himself as being in the operating-systems business, he has no intention of giving that system away. (He learned that lesson the hard way at IBM.) He doesn’t want to build what he calls “horizontal” software that gets shared, e.g., Web 2.0 and Windows, the two great platforms for which every programmer in Silicon Valley seems to be writing widgets these days. Where everyone else in the business sees limitless opportunities in snap-together applications, Iacobucci sees a playing field so flat as to have no barriers to entry at all, and he doesn’t like it.

According to Dyson, DayJet’s competitors have so far pooh-poohed its software, assuming they’ll be able to buy their own off the shelf at some point. Eclipse Aviation’s Vern Raburn hopes Iacobucci might be persuaded to license his tools, because Raburn’s own business model depends upon air taxis’ taking off. Iacobucci says that isn’t going to happen. “There’s a shift away from building another platform toward building highly integrated, vertical, special-purpose, high-performance systems,” he argues. Iacobucci envisions more companies like his own, in which the competitive advantage resides in custom-built, deeply proprietary, real-world operating systems that don’t just streamline accounting, but become the central nervous systems of entirely new, scalable businesses. He’s looking to build barriers to entry out of brainpower—so much of it that rivals can never catch up. (“It’s like in Dr. Strangelove,” Sawhill quips. “‘Our German scientists are better than their German scientists.’”)

Iacobucci points to Google as an example of what a vertical system can accomplish. While everyone raves about free services on Google, the largely invisible supercomputers in Google’s data centers are themselves invisibly tackling a variation on the traveling-salesman problem: How do you solve millions of searches in parallel at any given second? “When you get into mesh computing,” the name for Google’s technique, “that’s what it’s all about: managing the complexity,” Iacobucci insists.

But no company has ever built a business model around complexity from the ground up—until DayJet. Thumbing his nose at the prevailing ethos in software circles of “the wisdom of crowds,” let alone that “IT doesn’t matter,” Iacobucci has set out to first invent and then dominate a market he might have otherwise just sold software to. “When we built generic software at IBM and Citrix, the other side would always reverse-engineer it,” he says. “The only thing the customer sees here is an incredible service. This is ‘software as a service.’”

Fast Company  |  July 2006

Rise of the Aerotropolis

As competition shrinks the globe, the world is building giant airport-cities. They look monstrous to American eyes--and that could be a problem.

Rise of the Aerotropolis, by Greg Lindsay

The name wasn’t terribly auspicious: Nong Ngu Hao, the “Cobra Swamp.” But the location, a mammoth piece of ground in the sparsely settled landscape between Bangkok and the southern coast, was nearly perfect. Thailand’s leader at the time, the visionary-if-dictatorial field marshal Sarit Thanarat, had chosen this spot to build his country’s bridge to the 21st century, in the form of a gleaming international airport. It would be a long time coming.

The field marshal died suddenly in 1963, and the airport was postponed for decades; meanwhile, Thailand’s neighbors either eviscerated themselves or else offered up their cities as the First World’s factories. By the time the 21st century actually came into view, the field marshal’s democratically elected heirs watched enviously as the Dells, Seagates, and Motorolas of the world parceled out pieces of their sprawling supply chains across Indochina, creating hundreds of thousands of jobs for lottery-winning cities such as Kuala Lumpur and Singapore.

But before the end of this year, on a still-soggy tract that now lies at the creeping border of Bangkok’s suburbs, a new $4 billion mega-airport will finally open, forming the heart of a nascent city. When it’s finished, the erstwhile Cobra Swamp, now Suvarnabhumi (the “Golden Land”), will pump more than 100 million passengers a year through its glass portals, about as many as JFK, LaGuardia, and Newark aiports combined. Within 30 years, a city of 3.3 million citizens—larger than Chicago now—will have emerged from the swampland.

To the jaundiced American eye, such a project might appear to be the terminal metastasis of the sprawl represented by O’Hare, LAX, or JFK. But to dismiss it as the product of Asia’s infatuation with all things mega would be to miss the carefully calibrated machinery underneath. It’s a machine U.S. companies ignore at their peril at this time of escalating global trade and frictionless competition. It even has a name, the “aerotropolis,” and a creator, John Kasarda.

In the relatively obscure world of urban planning, Kasarda, a professor at the University of North Carolina’s Kenan-Flagler Business School, has made a name for himself over the past decade with his radical (some might say bone-chilling) vision of the future: Rather than banish airports to the edges of cities and then do our best to avoid them, he argues, we should move them to the center and build our cities around them. Kasarda’s research has laid bare the invisible plexus of air-cargo networks that have shrunk the globe (much as railroads did for the American West). And his conclusions are expressible as a series of simple numbers: Over the past 30 years, Kasarda will tell you, global GDP has risen 154%, and the value of world trade has grown 355%. But the value of air cargo has climbed an astonishing 1,395%. Today, 40% of the total economic value of all goods produced in the world, barely comprising 1% of the total weight, is shipped by air (and that goes for more than 50% of total U.S. exports, which are valued at $554 billion). Raw materials and bulkier stuff still take the slow boats, but virtually everything we associate with our postindustrial, value-added economy—microelectronics, pharmaceuticals, medical devices, Louis Vuitton handbags, sushi-grade tuna—travels via jumbo jet. We may think of the 1960s as the jet-set era, but the supremacy of (soft) airpower has only now begun to reshape our ideas about how cities should look, how they should function. “They’re now effectively a part of global production systems,” Kasarda says, “and without that connectivity, you’re out of the game.”

Those statistics lay out much of the story line of the coming age of global competition, and it’s a story being written by many of our most formidable current and future rivals. Hong Kong is premising its entire world-trade strategy on the primacy of the airport: Its Chek Lap Kok already has a mini-city stationed on a nearby island for its 45,000 workers, and SkyCity, a complex of office towers, convention centers, and hotels will soon be visible from its ticket counters. On the Chinese mainland, construction has begun on Beijing Capital Airport City, a $12 billion master-planned city of 400,000, and a massive airport expansion is coming to the city of Guangzhou, in the Pearl River Delta. Thirty-three miles to the south of Seoul, New Songdo City, billed as the most ambitious privately financed project in history, is taking shape in the Yellow Sea: The metropolis of 350,000 people, many of them expatriates living and working on-site for multinationals, is being built on a man-made peninsula the size of Boston. The estimated $20 billion cost is being underwritten by Korea’s largest steel producer and by the real-estate developers from the U.S.-based Gale International.

The same process is taking place elsewhere in the world as well. Several cities in India will see their airports dramatically scaled up in the coming years. The endless building spree in Dubai includes construction of the world’s largest aerotropolis—Dubai World Central—which will begin opening in stages as early as next year. (By the time it’s completed, DWC will have more than twice the capacity of Frankfurt’s airport and a permanent population of 750,000, all at an estimated cost of $33 billion.) In Amsterdam, office space next door to Schiphol Airport costs more per square foot than an open loft on one of the city’s picturesque 17th-century canals.

The aerotropolis represents the logic of globalization made flesh in the form of cities. Whether we consider globalization to be good or simply inevitable, it holds these truths to be self-evident: that customers on the far side of the world may matter more than those next door; that costs must continually be wrung from every process; that greater efficiency is paramount, followed closely by agility; and that distance equals time, which equals friction. To cope with these demands, we’ve already taken to living much of our lives in the digital world. But for every laptop order that zips to Penang via email, a real 747 must wing its way back with the laptop itself in its hold. If the airport is the mechanism making that possible, everything else—factories, offices, homes, schools—will be built in relation to it. “This is the union of urban planning, airport planning, and business strategy,” Kasarda says. “And the whole will be something altogether different than the sum of its parts.”

A Well-Oiled Machine

Historically, cities have sprung up at the junctions of oceans and rivers (New Orleans) or railroad networks (Chicago), which made the docks or the blocks around the central station the choicest real estate in town. But “cities are always shaped by the state-of-the-art transportation devices present at the time of their founding,” observes Joel Garreau, author of Edge City and chronicler of American sprawl. “The state of the art today is the automobile, the jet plane, and the networked computer. Because of the airport, it’s possible to imagine a world capital in a place that was once an absolute backwater—a Los Angeles or a Dallas appearing in an utterly improbable location, including Bangkok.”

The budding city surrounding Suvarnabhumi illustrates Kasarda’s claim that “the three essential rules of real estate have changed from ‘location, location, location’ to ‘accessibility, accessibility, accessibility.’ There’s a new metric. It’s no longer space; it’s time and cost. And if you look closely at the aerotropolis, what appears to be sprawl is slowly evolving into a reticulated system aimed at reducing both.” In his sketches for Suvarnabhumi, the outermost rings extend nearly 20 miles into the countryside from the runways. There, giant clusters of apartment towers and bungalows will take shape; the former will house Thais working the assembly lines and cargo hubs in the inner rings, the latter the expatriate armies imported by the various multinationals expected to set up shop around the airport. (No fewer than 10 golf courses are planned to keep the expats happy, not to mention shopping malls, movie theaters, and schools that seem airlifted straight from southern California.)

Moving in from the residential rings, the next layer will likely be occupied by the manicured campuses of those same multi-nationals—the back offices, R&D labs, and regional headquarters of the Dells and Motorolas that have been persuaded to relocate. Here, one will also find the hotels, merchandise marts, convention centers—anything and everything to sustain the knowledge workers laboring in the shadow of the airport. In the innermost rings, essentially abutting the runway fences, will be the free-trade zones, factories, warehouses, and logistics hubs designed for the FedEx/DHL/UPS combine—the just-in-time manufacturers and suppliers for whom time and distance from the belly of the 747 equals, quite literally, cost. New six-lane highways will link the inner and outer rings, with semitrailers barreling down dedicated “aerolanes” while residents stroll along prefab boulevards. A high-speed rail link costing more than a half- billion dollars will connect Suvarnabhumi to Bangkok.

“This is the key to Thailand’s growth over the next five years,” says Suwat Wanisubut, director of the Suvarnabhumi Airport Development Committee. “No other project is this big. It will bring high-tech companies to this region from Malaysia, Singapore, and even southern China. We are now competing directly with them, and even with Korea and Japan.”

Despite a fondness for Olympian pronouncements, Kasarda is neither a Le Corbusier nor a Robert Moses (to name just two men who wanted to mold cityscapes in their own images). He sheepishly concedes that his visions of monstrous highways and multimodal cargo hubs would make Jane Jacobs—the late patron saint of human-scale cities—toss and turn in her grave. But Kasarda has moved beyond the comfy, retro dictates of the New Urbanists. He isn’t concerned with “the way we live now” but with the naked realities of how we do business now.

Is the United States prepared for those realities? The closest thing to an aerotropolis in America today is Memphis International, home for 25 years to FedEx. Memphis has been the busiest cargo airport in the world now for 14 years running, a fact visitors learn before they’ve even left baggage claim. Ninety-four percent of that title is owed to FedEx, whose nightly “sort” is still one of the logistical wonders of the world: 200 planes descend in a swarm, disgorging more than a million packages and overnight letters that must pass through the interlaced conveyor belts and chutes of the “primary matrix” before being reloaded and shipped out.

Since its first sort in 1973, FedEx has become the largest private employer in a metropolitan area of close to 1 million people. The University of Memphis concluded in a study two years ago that the airport (and essentially FedEx) was directly and indirectly responsible for more than $20 billion in annual output and for 166,000 jobs—one of every four in the region. Only 30,000 or so of those are on FedEx’s payroll; the rest have flourished within the ecosystem of warehouses, trucking firms, factories, and offices nestled within its footprint.

To calculate the value of setting up shop in Memphis, just compare its informal FedEx drop-off deadlines with your own: Midnight or even 1 a.m. versus 9 p.m. on the East Coast and as early as 4 p.m. out West. That’s a lot of extra production. Jo Ferreira, FedEx’s managing director of hub-area business development, routinely juggles the requests of as many as 40 to 50 companies jockeying for space around Memphis and smaller hubs like Indianapolis, Phoenix, and Oakland. “Proximity matters more and more to them,” she says, and Memphis offers an ideal combination of inexpensive, semiskilled labor, acres of turnkey warehouse space, and the junction of three states all fighting for their business. “But the biggest driver,” Ferreira says, “is the growing urge that when we want something, we want it now. And as soon as one company relocates here or to any of our hubs, the next thing that happens is that three or four of its competitors come calling.”

But while Memphis might qualify as a proto-aerotropolis—with the FedEx hub providing just enough gravity to keep its customers from spinning out of orbit into Mississippi or Arkansas—few other American cities are even remotely ready to build their own analogues. The zoning is too haphazard, the NIMBY-ism too rampant, the love of the strip mall and ranch house too profound. In other words, there’s a reason Kasarda could get his vision built in Bangkok but not Atlanta. And that could be dangerous in the long run: “Individual companies don’t compete,” he says. “Supply chains compete. Networks and systems compete.” People forget that FedEx started in Little Rock, Arkansas, but the airport there couldn’t keep up—so FedEx founder Fred Smith looked around until he found one that could.

Kasarda is fond of quoting the biologist Sir D’Arcy Wentworth Thompson’s insight that growth creates form, but form limits growth. The challenge facing our airports today is the same confronting any company that has at last bumped up against the limits of its growth and is contemplating some creative destruction. Much like Microsoft and its dilemma about what to do with Windows, our airports are the operating system underlying a network that endlessly crisscrosses the globe. And like the software giant, they are bound to maintain backward compatibility with everything that has come to flourish around them. But whereas Microsoft only has to worry about its third-party developers, urban planners attempting to retrofit an aerotropolis will be forced to choose between optimization and saving people’s homes. The consequences of each decision are equally stark: Either risk building competitive disadvantage into the very fabric of cities, or begin unwinding the fabric itself.

The Thais and other governments across the developing world play the part of Apple or Linux in this metaphor. Their willingness to break with the past in pursuit of something truly new stems largely from their having so little to protect. Indeed, the imposition of an aerotropolis may be one of the only remaining ways some developing countries can restore order to their collapsing urban grids, a process made considerably easier by the relatively weak civil rights of their citizens. In Dubai, for example, the emirate’s ruler and “CEO,” Sheikh Mohammed bin Rashid Al Maktoum, has been building an aerotropolis basically by fiat for at least the last decade. Essentially a finger of sand jutting into the Persian Gulf, Dubai is almost always approached from the air. It also happens to sit less than an eight-hour flight from half the world’s population. The $33 billion Dubai World Central, probably the purest expression of the aerotropolis concept to date, will unwrap its first ring late next year—a logistics hub with more than three times the capacity of FedEx’s in Memphis. Dubai Logistics City is to have its own access to the runways, a forest of warehouses and office space, “e-customs” processing for anyone operating within the zone, and enough on-site housing for 40,000 workers. Some 1.2 million square meters of factory and warehouse space will serve customers including Boeing, Caterpillar, Chanel, LVMH, Mitsubishi, Porsche, and Rolls-Royce. In the second ring, free-trade zones like Dubai Internet City are to host the regional outposts of titans such as IBM, Microsoft, and Oracle. And in the outermost ring, prepackaged burbs such as Dubai Festival City will warehouse 77,000 residents, who will pass their days in one of the world’s largest malls, on a Four Seasons–maintained golf course, or working in one of the on-site office towers that offer, according to its promotional Web site, “a thriving, dynamic centerpoint situated just two kilometers from the emirate’s award-winning international airport.”

I paid a visit to Dubai in February and found little more than a few apartment buildings, an Ikea, and a six-lane highway leading to the airport a mile or so away. The man in charge of selling this city to its future inhabitants was an affable Canadian mall-developer named Phil McArthur. At the end of my tour—which included all 18 holes on the golf course and watching Pakistani laborers getting bused back into the desert—I grilled him about whether anyone would want to live in “hillside villas” built into the sides of sand dunes. “I already live here,” he said, shrugging. “But then again, I know what’s coming, and when, so that makes me a little different from everyone else.”

A Cure for What Ails Us?

John Kasarda obviously sees the aerotropolis as key to America’s competitive agility, and a critical one at that. Implicit in his thinking is a coming world of exponential population increase and cutthroat competition for resources and profits. His vision may evoke everything Americans find terrifying about globalization—a civilization cast in quick-drying cement, packed with worker drones—but if you grant Kasarda’s seemingly implacable logic, you have to ask: How willing or able are we to adapt? Ours is a country, after all, that allowed Denver’s Stapleton to be abandoned outright after encroaching suburbs cut off its oxygen supply. Compare that with Suvarnabhumi, slated to become a self-contained province governed by the prime minister himself, and it’s clear our squeamishness about dictating how and where our cities grow could ultimately come back to haunt us.

Nearly a decade ago, Kasarda met with World Bank officials in Bangkok to convince them of the broad social benefits an aerotropolis would bring. His sales pitch was ingenious: By helping to connect the city and the surrounding countryside to the rest of the world, Thailand would actually be furthering its own, seemingly unrelated goals for the region. It would improve the lot of women (by bringing in manufacturing jobs), help farmers and fishermen sell their orchids and tiger prawns overseas (by connecting them to foreign markets), and stem the flood of farmers into overcrowded cities such as Bangkok (by creating a new population center with a tremendous hunger for labor). Kasarda’s plea got nowhere at the time, but his thinking eventually won the Thais over.

In January, Kasarda made a similar pitch to another hard-bitten city: Detroit. He had been asked to make his usual stump speech for a group of 60 or so University of Michigan architecture students who were about to undergo an annual urban-planning exercise known as a “charrette.” Held every year by the dean of Michigan’s architecture school, each charrette contemplates a different aspect of Detroit’s ongoing attempt at urban renewal—which makes for plenty of ground to cover.

This year’s installment opened with the possibility of a Detroit aerotropolis as its premise. Nearly unique among major U.S. cities, Detroit has 25,000 acres of woods and open fields surrounding its main airport, a hub for Northwest Airlines. Just seven miles to the west—a straight shot along I-94—is a second, smaller airport, Willow Run, which caters to the chartered cargo and corporate jets of the Big Three automakers and their assorted suppliers. If one were to link the airfields with the highway, and with mass transit stretching to downtown Detroit, the spine for an aerotropolis would be in place.

Upon emerging three days later, three student teams presented master plans that offered everything from full-fledged logistics hubs around Willow Run to a grand boulevard running through a greenbelt of mixed-use neighborhoods and office parks designed in the high style of Silicon Valley. The aerotropolis, they concluded, could stem the massive brain drain from local universities and the entire region. It could anchor a new city, with 100,000 new residents, in Wayne County’s western suburbs. Kasarda was ecstatic: “This could turn around all of southeastern Michigan!” And his hosts became his newest converts.

Three months later, Mulu Birru, Wayne County’s economic development guru, presented a “best of” compilation of the students’ designs to his boss, Wayne County executive Robert Ficano, along with a “nonbinding memorandum of understanding” for building the aerotropolis—a plea to the governor to grant them the cash and the planning powers necessary to bring Detroit and adjoining communities to the table. Birru, who worked a minor miracle by helping to turn Pittsburgh around, sees a Detroit aerotropolis as a haven for “green” architecture and a magnet for auto suppliers, biotech firms, ethanol plants, and just about any other technology-intensive business you can think of. In fact, auto-parts outfits such as Visteon, Magna, and the Chinese entrant Century Automotive have either built or are eyeing new campuses in the aerotropolis zone. (Many auto components today are lightweight and digital, and thus easily shipped by air.)

After our meeting, Birru’s deputy and I drive off for another aerotropolis-site inspection, wending our way through the parking lot of Visteon Village, home to some 3,000 auto-parts workers and nearly as self-contained as the 19th-century New England mill town it resembles. We take the back roads to the future grounds of the Pinnacle Aeropark, a parcel of open land just south of Detroit’s airport that will serve as a prototype for the aerotropolis when ground is broken next year.

At one point, we pull over next to a field of dandelions less than a mile from the runways. These thousand acres are set to become the Entertainment Center, a Magna-supported vision that could have been a leftover sketch from Suvarnabhumi. Hotels, a casino, a performing-arts center, retail, and even a horse-racing track (Magna’s entertainment division happens to own Pimlico) would all sit here, cheek by jowl.

When you stand there, the airport peeking out from behind the overpass suddenly seems an optimistic symbol. It makes as much sense—and probably more—for the people of Detroit to orbit a new global portal as it does for them to cling to some frayed and decrepit version of Jane Jacobs’s ideal. It’s an opportunity for the city to start fresh, to recast itself in our networked economy’s own image. It’s a chance that Detroit, of all places, can ill afford to miss. The rest of us had better take good notes.

Advertising Age  |  September 2005

A Marketing Reporter’s Journey Into Airworld I

A three-week daily series.

Airworld 1

PART 1: INTRODUCTION

As I write this, I am cinching my luggage tight and preparing to head out for JFK International Airport on the first leg of an Advertising Age reporting trip that will take me and my readers across a globe-spanning swath of “Airworld.”

My reports will appear here on AdAge.com during the next three weeks and in two large special reports in the weekly print edition of Advertising Age after that.

Airworld is the name we have given to the invisible country that begins on the other side of the x-ray machines and extends in all directions beyond the concourses as the air corridors through which our airplanes fly. Among other things, this closed system of terminals and shuttling aircraft is its own vast media and retail ecosystem. Taken as a whole, it is one of the largest coherent stand-alone marketing venues on earth.

Airworld is a nation populated by nearly 100 million travelers in the U.S. alone, and passenger traffic—even after 9/11—is expected to double in 15 years. The airports at the center of Airworld are the hubs of our economy, circulating the people and consumer goods that can’t be reduced to digital bits. They already generate tens of billions of revenues on their own, more than half of which has nothing to do with aviation. They’ve also evolved into giant hubs for the consumption of media—billboards, magazines, duty-free and CNN Airport news—key to the continued success of advertising and media giants like Clear Channel, JC Decaux and Time Warner.

Airworld is also a petri dish in which to test the ongoing evolution of brands. The domestic airline industry is facing the greatest shakeout in recent history, with Delta and Northwest mulling chapter 11. By the end of this year, nearly a quarter of all domestic flights might be flying under bankruptcy protection. With oil at $70 per barrel or higher, can airlines persuade passengers to turn away from the lowest possible price they found online and opt for a more expensive ticket? And how will they do that without superior branding, marketing and customer relations—the skill set that enabled Southwest and JetBlue to succeed where so many low-fare carriers have failed.

I will be spending the next three weeks living the story in airports, watching this retail universe at work, and meeting with airline executives, passengers and grizzled road warriors.

And that sounds like something out of Steven Spielberg’s 2004 movie The Terminal, the story of an Eastern European traveler who becomes stranded in New York’s JFK airport as his homeland collapses in political chaos that renders his passport invalid. Unable to go home or enter the U.S., he becomes an inhabitant of the terminal’s international transit lounge and the tightly closed universe of Airworld. As one of my goals on this journey, I plan to meet the man whose real-life experience inspired the movie.

Stop by AdAge.com every day to read my latest reports and if you have ideas or questions about the project, don’t hesitate to drop me an e-mail.

That’s it for this first dispatch—I have to run because for me, Airworld is now boarding.

PART 2: THE JETBLUE EXPERIENCE

A ‘Cheap Chic’ Flight With a MarketingTrendsetter
September 13, 2005

ORLANDO—For my first day’s foray into Airworld, I lift off on JetBlue. What better airline to choose for the start of this exploration of the aviation marketing business than the one that has played such a key role in revolutionizing the industry?.

JetBlue was the first low-fare carrier to rebrand flying as a “cheap chic” experience. Southwest may have become an industry giant with the no-frills formula its executives feel they perfected back in the ‘70s (57 consecutive profitable quarters can’t be wrong, can they?), but JetBlue is the first of Southwest’s descendants to evolve the formula and to arguably make flying JetBlue a sign of one’s good taste.

Price-setting power
Thanks to a combination of technological innovations (the seatback satellite TV), an extraordinarily high level of customer service and espirt de corps, and a dollop of style (the new Airbus planes, with their leather seats, the Terra Blue chips), the JetBlue brand transcended the airline industry. The architect David Rockwell, who is designing the interiors of JetBlue’s new $875 million terminal, compares—with a straight face—JetBlue to the iPod (the ne plus ultra of compliments.) JetBlue, a low-fare carrier, is not the least expensive fare on many of its flights. Thanks to a superior product and brand, JetBlue has actually regained at least a little of its power to set prices. In an Orbitz-, Expedia- and Travelocity-powered marketplace of near-perfect information about low fares, I would argue this is a fairly significant development.

One of the premises I hope to test on this trip is the idea that the “trading up” phenomenon described in the book of the same name is finally beginning to appear in the airline industry years after sweeping through many retail products. At the low-fare end of the market, JetBlue and Song are building sleek brands that are recasting air travel as a lifestyle experience rather than simply cheap transport from A to B. At the high end of the market, Virgin Atlantic and other foreign carriers like Qantas, Emirates, Singapore Airlines, and Cathay Pacific had crafted boutique luxury brands. And the middle of the market—the Big Six of American, United, Delta, Northwest, Us Air/America West and Continental—would eventually fall away. (With Delta and Northwest teetering on the edge of chapter 11, that doesn’t seem too far-fetched.)
I began the day with a cab ride to John F. Kennedy International Airport, where JetBlue currently occupies Terminal 6, the former home of National Airlines built around 40 years ago by I.M. Pei. Next door is Eero Saarinen’s iconic and deserted TWA terminal, behind which JetBlue will build its new terminal starting next month and due to be finished by 2008.

Inside the terminal, my JetBlue baby-sitter for the day, Bryan, was waiting. He would fly with me down to Orlando, Fla., and accompany me on a tour of the airline’s $25 million pilot and flight crew training center, which opened this summer next door to the similarly new $22 million hangar where the fleet’s seatback TVs are installed. (This was the price I paid for the complimentary flight.)

Bryan gamely allowed me to wander the terminal for a while to see the sights before our flight. While on the one hand it’s overcrowded—JetBlue is spending another $25 million on temporary gates to tide passenger traffic over until the new terminal opens—JetBlue’s terminal also houses a day spa and sushi bar (where the chef was already beginning to prep at 9 a.m.).

JetBlue took Southwest’s successful marketing concept and evolved it into a lifestyle sell.
I wanted to ask at least one person why they chose to fly JetBlue, and rather than ask the usual suspects (college students, families likely to be on their way to Florida with me) I approached what had to be the sharpest-dressed man in the terminal, resplendent in a pin-striped suit with pocket square and equipped with handsomely battered luggage. You’re obviously a business traveler, I asked. Why are you flying JetBlue?

‘You don’t screw things up’
“You know,” he said, “I was sitting next to a senior operations guy for the airline on my last flight, and he asked me the same thing. I told him ‘You don’t screw things up.’”

The well-dressed man was David B. Stetson, managing partner of Burlington, Vt.-based D.B. Stetson & Associates (“Catalysts for Growth,” his card said), and he listed his favorite aspects of the airline: “Being on time, and just the sheer operational competence.”

He went on. “Most flights I take on JetBlue are too short to be about the TV. I just read something I bring along. If I fly coast-to-coast, then I’ll fly United and request an upgrade. But I don’t want to fly any other carrier if I can’t fly first class. I’d be interested in a premium JetBlue product—a different class flight.”

Did you voice this desire to the JetBlue exec you bumped into? I ask. And what did he think of that, considering how obsessed JetBlue is with streamlined operations (introducing a first-class cabin is an operational headache that low-fare-carriers expressly want to avoid)?

“What I told them was to start another brand completely, pitched at customers like me. Any flight under two hours, I’ll fly JetBlue right now. But I’d want more for longer flights. I’d also like Starbucks coffee on the flight, and I’ll pay more to get it. But they’ve never screwed me, and in the end, I fly them for that.”

After I entered the cabin for my own flight to Orlando, I began what Bryan called “the JetBlue experience,” which for me means that I am gobbling smoked almonds and trying not to be distracted by a Jerry Springer retrospective on VH1 as I write this first entry.

All of the little JetBlue touches were on display: the serendipity of channel surfing live TV, the bountiful bags of nonperishable snack food and the chipper staff.

A JetBlue car picked us up from Orlando International and drove us to the edge of the airport, to “JetBlue U.,” where a steadily increasing percentage of the airline’s pilots and flight crew were trained. The place is barely three months old, but plans are already on the drawing board to knock down one of the walls to make room for more flight simulators at $25 million per. In size and appearance, the devices resemble nothing so much as lunar landers.

The classrooms for flight crew would be overflowing soon, too, it seemed. The airline hired somewhere between 400 to 500 crew members last year, would add 600 this year and was looking at 900 more next year.

The reason? The imminent arrival on Aug. 14 of JetBlue’s first E190 jet from Embraer, the Brazilian aerospace consortium and the continuing rebound of air travel. The dramatic drop-off in passenger traffic following 9/11 is over for now (barring some new disaster). Among other things, JetBlue’s frantic expansion plans tell us that as a country, we are no longer afraid to fly.

That horiffic September day’s biggest economic victims were the airlines, which have collectively lost more than $30 billion since then. The aftermath of 9/11—the Iraq invasion and resulting spike in oil prices—is still hang as a potential threat to dismantle the industry as we know it.

As I continue my contemplation of the JetBlue experience in its larger context, I also take the time to WiFi my way to Jason Brown’s “Sleeping in Airports,” the online resource for anyone interested in crashing overnight at their local terminal. I’ve been reading up on Los Angeles International Airport, which isn’t likely to prove as accommodating as this one in Orlando. Last night, following Brown’s advice, I found the leather couch hidden behind the Hyatt’s ballroom. And behind that, I found an even more obscure carpeted corridor where I could hide. Grabbing one of the cushions from the couch, I slipped on my eyeshade and put in my earplugs, popped two Tylenol PM and sprawled on the floor.

I slept well enough ... until the hotel’s security guard nudged me awake with his toe. He suggested I try the terminal level “just find a corner and sleep there, but you can’t stay in the hotel” but I opted for plan B, a quiet spot near the baggage claim, which didn’t fire up until 7 a.m..

Why was I sleeping in the airport? Well, the answer is not exactly clear, even as it is in keeping with the overall spirit of this project, in which I plan to physically integrate myself into the landscape of Airworld. It isn’t about money; it’s about point-making-masochism.

I suppose I’m underscoring the essential inhumanity of airports—they’re extremely efficient at processing passengers from the curb to the gates, but should you choose to stick around, well, the tile gets pretty cold at night. Still, maybe it’s a sign that I’m finally acclimating to my new bizarre existence. Or maybe there are more Hyatts, Hiltons, Sheratons and Ramadas in my future. Stay tuned to find out.

PART 3: PANIC ATTACK

The Curious Effect of Terminal Isolation on the Traveling Psyche
September 14, 2005

AIRBORNE—Enfolded in a blessedly cushioned airline seat and leveling off after a climb out of Orlando, I am inclined to seriously rethink my original idea that sleeping in airports will be some great adventure. Airworld, it turns out, can be as much a grim gulag as a glitzy shopping mall.

As I leave Florida behind and rocket west toward Los Angeles, I feel a sudden sense of deep kinship with those disheveled wretches one sees in newspaper photos that document every blizzard, electrical outage, aviation workers strike and assorted security incidents that suddenly shut airports, stranding the travelers within. It also took only two days entombed in the sterile bowels of Orlando’s terminal for me to gain a new appreciation of the true ordeal of psychological endurance dramatized in the movie The Terminal.

I also have new respect for frequent fliers and their Darwinian cousins, the road warriors, who more or less “live” continuously in such conditions. The latter really do live in an Airworld ecosystem where seemingly every decision—where to fly, who to fly, what to drive, where to stay, what to eat—adds frequent flier miles, or points, or some other form of sub-currency that either circulates through Airworld in an endless series of upgrades or else is cashed in for something occasionally tangible—magazine subscriptions or whatever.

I’ve been trying live this lifestyle vicariously for months on online communities like FlyerTalk.com and the brand-new AirTroductions.com (think Friendster for the frequent-flying set) but learning to read the algebraic postings on those sites (no one will ever say “I’m flying to Orlando on JetBlue tomorrow” when they can post “B6, JFK -> MCO, 9/9/05” instead) is no substitute for experience.

And unlike the legions of management consultants who seem to populate Airworld (an extraordinarily lucrative demographic who become more monastic the more they fly), my life as a freelancer isn’t underwritten by a generous corporate patron (in exchange for every minute of my waking life, of course.)

I also wanted to answer another, more existential question: what would happen if you went to the airport with no intention to leave? I began to find A typical stranded terminal refugee during a recent airport closing. out that first morning after a bad sleep as I faced the prospect of killing nearly two more days before I could leave this place. At either end of the terminal are the security checkpoints for the “A” and “B” gates, which lie past a pair of public squares—one of which is anchored by a Hyatt Regency, its rooms arrayed around an 8-story atrium—- connected by a mall and a food court.

Until one heads out to the gates –- separate satellites connected by monorail trains on the far side of security –- there is little, other than the ticket counters, to dispel the notion that I’m in some random Floridian mall replete with a Chick-Fil-A, a fountain, inviting wooden benches and wicker chairs, pastels and palm trees.

What I want to know is: Did I have a headache already and didn’t notice or did the headache start upon realizing that this mall really was home?

My first priority was WiFi, and thanks to the Hyatt, the entire atrium was filled with it. My e-mail client wasn’t working properly, and 10 hours’ worth of e-mail mysteriously disappeared from the server, but at least I had a lifeline out to the real world.

But I was exhausted, I had a throbbing head, I needed sleep and it was only 6:30 p.m. I ordered a beer from the Hyatt’s lobby bar (suddenly I couldn’t bear to face the terminal—I’m went to hide out in this plushly carpeted corner of Airworld for a while) and screw my face together so the bartender won’t see my panic.

I was panicking because I didn’t feel like I could wait until midnight for the terminal to quiet down so I can sleep. I couldn’t sleep in the airport that night anyway—I needed real sleep, not four hours of catnapping. I’m never going to be able to entertain myself in this mall for two days, I thought. And I’m never going to last 21 days breathing endlessly recirculated air, eating $10 sandwiches and power bars and sleeping on an air mattress. I was my 8-year-old self again, the one who got homesick on his very first sleepover at a friend’s place. I e-mail Sophie: “Please call. I need to be talked off the ledge.”
She does, and she has a succinct recommendation: Get a room. And keep getting them as the trip goes on.

“You’re already spending 18 hours a day in an entirely enclosed space watched by the FAA,” she says. “You’ve got to get out of there occasionally. You can’t push yourself in every direction at once; think about the hierarchy of needs—you’ve left behind shelter, food, the woman who loooooves you. You have to get one of them back, and I think it should be sleep. If you’re continually exhausted and hungry, then no matter what you do, the world will just suck. If you really want to write about this, you need to splurge now and then on a room in order to be at your best.”

Of course, the whole point of this trip is to explore just how badly airports can become when your exposure is more than the typical two hours—just long enough that the combination of McDonalds, the SeaWorld store and the Fox Sports Bar & Grill to sufficiently dull your senses. I mutter something about “wanting to experience psychic breakage” with my real life back home, but clearly I don’t have the mental toughness at the moment to sincerely mean it.

Airworld isn’t home right now. It’s alien and frightening, and I have too much mental static to cope. I hand over my credit card at the front desk of the Hyatt and pay the going rate. After I explain to the manager on duty that I had intended to sleep on the floor again tonight, he takes pity on me and hands me two drink tickets.

I’ll need them tomorrow, but right then I headed up to my room, strip and sleep for 12 hours. At one point during the night I dream about plane crashes.

The next morning, I don’t feel refreshed. Don’t fight it, I kept telling myself. I’m the one who wanted to live in the most secure malls in America for three weeks. Like others who are forced to, I need to accept the airport on its own terms.

I gathered my wits, took a determined deep breathe and thought, If I’m going to be stuck in a mall for this long, there is only one thing to do: Go shopping.

I started at Starbucks, a place of reassuring comfort for me. Even with the security queues piling up just outside, the blonde wood tables and piped-in Dylan successfully preserved that “third space” the company is always talking about. (They preserved it so well that Starbucks became my command center for the rest of the day—it was the only place in the airport that remotely hinted of home.)

In an effort to lighten up, I pass the Busch Garden’s boutique and slip across the way to have my photo taken with Snow White before wandering into the Disney “Earport” to buy an accompanying frame inscribed with “I can still remember the magic of our first visit to Walt Disney World ...” ($16).

Nearby, I could have bought a flight suit or a stick of freeze-dried ice cream or a $20 talking “astrochimp” named “Ham” from the Kennedy Space Center, just next door to the Earport. A pair of tourists browsing the racks beside me asked the cashier “Is all of this available at the Space Center?” “Everything and more,” she replied. “Same prices?” “Same prices.”

Not that this or the SpongeBob t-shirt from the Universal Studios store or the alligator seasoning sauce from the “Florida Market” or the short boards on display at Ron Jon’s Surf Shop are atypical of terminal commercial life.

Airports’ evolution into secure shopping malls has been in the works for nearly a decade now. According to the Airports Council International, non-aeronautical revenues began outstripping the aeronautical kind as far back as 1997. In 2002 (the last year for which I currently have data), U.S. airports generated roughly $14 billion in revenue, 58% of which (or $8.15 billion) stemmed from “non-aeronautical” sources—the services and concessions that have become as integral a part of Airworld as glass walls and escalators.

At Orlando International—the fourth busiest airport in the U.S.—concession revenue grew 9.3% in fiscal 2004, to the point where “concessions” (defined as food, shopping, rental cars and parking) comprised 50% of revenues, or 60% if you tossed in the Hyatt.

After some more interviews about the logistics of Airworld, of which I will write later, I am focused and back in sync with the project. But when I finally trudge down the boarding ramp and climb into this airliner bound for Los Angeles, I am taken by a sense of sudden lightness and relief. It’s probably the drug-like elation experienced by those frequent-flier junkies who travel for the sake of the movement itself and the chance to go anywhere other than the place where there are right now.

PART 4: ON A WING AND A SONG AT LAX

The Odd Airport That Has Long Banned Advertising
September 15, 2005

LOS ANGELES—I purposefully chose Song rather than JetBlue for the five-and-a-half-hour transcontinental flight to Los Angeles. After all, it was a name in the news as well as the conversation all around me along the way. In fact, not long after I landed, its parent, Delta Air Lines, filed for chapter 11 as everyone predicted.

There is a certain sense of adventure surrounding Song, whose innovative marketing strategies could all be for naught if it is ultimately strangled by the tightening financial troubles of Delta. On another level, it is effectively spearheading Delta’s attempt to reinvent itself out of bankruptcy as something of a low-cost carrier overall, as demonstrated in Delta’s new “Simplifares” programs and lower walk-up ticket prices.

Back in New York JetBlue’s sales and marketing executives had obliquely dissed Song as too “product-focused,” which I interpreted as “gimmicky.”

But personally, I found that JetBlue had struck a nice balance between style and efficiency, while Song was attempting to win market share on behalf of Delta with a blizzard of branding initiatives—organic food by chef Dave Lieberman, cocktails by Rande Gerber, uniforms (and stationery) by Kate and Andy Spade, Song Records (a partnership with Artemis Records, with CDs available on the flight for $14), a pair of Song-inspired $200 jeans by Chip & Pepper and the temporary Song store that had opened with a splash in SoHo back in New York. Song seemed like Virgin Atlantic in reverse—an airline giving birth to a constellation of brands rather than emerging from one.

Song doesn’t just have live satellite TV—there are pay-per-view movies (including Breakfast At Tiffanys for anyone truly longing for the Jet Set era of 1961 again), and onboard MP3s, and even a music trivia contest.

Being a bit of a Jet Set nostalgist myself, I thoroughly enjoyed sipping an $8 cocktail at 40,000 feet while listening to The Thievery Corporation track “International Flight” followed by Air’s “Universal Traveler.”

Still, my seatmate –- who was neither a woman nor leisure traveler, both of which are Song’s targets –- only flew Song “because of the price. You can’t beat the price on this route.”

The flight attendant we struck up a conversation with didn’t see it quite the same way. “It’s not about the things as much as it is the people, still,” he said. “And you don’t walk into a Cadillac dealership expecting a VW price.

A Song airliner sits on the tarmac at LAX. The main terminal building is in the background. But you can make a difference with the little things.”

Later, the flight attendant told me, “The best thing [former Delta CEO Leo] Mullin could have told [original Song president John] Selvaggio was to totally separate this operation from Delta. Because if they had gone through Delta’s regular marketing department, all they would have heard was ‘Don’t do that.’ It was still all the old thinking.”

Of course, Selvaggio fled Delta before long into the arms of Virgin, where he is supposed to be developing Virgin America, its nascent low-cost carrier. (When it comes to the new generation of low-fare carriers, all roads seemingly lead to and from Virgin.) His former chief of marketing, Joanne Smith, is Song’s president now, and we’re due to meet next week in Atlanta. What I really want to know is whether Song will actually live long enough to answer the questions it and JetBlue have posed to the airline industry: Is there any way to differentiate yourself in an era of commodity products and perfect pricing? (And in the interest of full disclosure, thanks to Smith, I flew Song for a song—actually, for free.)

Shortly after touching down at LAX, I crashed for the night at a Super 8 motel in the sprawl just beyond the airport. I unwittingly helped justify Cendant’s $1.25 billion purchase of online ticketing engine Orbitz a year ago, as I used the site to chase down a rock-bottom fare for the night (I had no idea until later that Cendant owned, among seven other chains, the Super 8 brand). The next night, I was a guest (compliments of the house) of the Four Points Sheraton, a budget business traveler’s brand in the Starwood family. “This is the largest concentration of hotels on the coast,” the Four Points general manager, Phil Baxter, said, referring to the surrounding cluster of hotel towers as dense as L.A.‘s actual downtown. “We have 570 rooms and we’re just medium-sized.”
Cendant and Starwood are just two of the giant holding companies owning dozens of brands hovering at the periphery of Airworld.

It only took me minutes to realize why LAX was such a different kind of place within Airworld when I first entered it from the Song gate. It is the busiest origin and destination airport (i.e. non-hub) in the world. It’s the home airport for the second-largest media market in the country, the hub of the entertainment industry, but there isn’t a scrap of advertising anywhere. Its concourses are literally blank slates.

LAX has held out for decades against what its executive management once decried as crass commercialism—back in the 1970s, there was even a board resolution expressly forbidding any ads from going up. Besides institutional inertia, other reasons for the city’s uncharacteristic sense of restraint include spartan facilities and limited terminal space (LAX is so devoted to the pure function of processing passengers onto planes that it doesn’t even really have a name after all, just an airport code) and aesthetics. The architects and engineers in management really liked those white walls.

But all of that is about to change. LAX is only a few weeks away from awarding a contract worth $30 million a year or more over the next decade in terms of gross revenues to either Clear Channel or JCDecaux, the airport “outdoor” giants that consolidated their way to the top over the past decade, and are now engaged in a full-tilt struggle to win the last unclaimed piece of airport real estate.

On Monday, JCDecaux officially announced it had renewed its contracts in New York with JFK and LaGuardia, and had wrested away Newark Liberty from Clear Channel, creating the second-largest regional airport advertising platform in the world, with 100 million annual passengers. (The largest is comprised of the London airports, which is also controlled by JCDecaux.)

LAX—Los Angeles International Airport—has long banned all advertising from its terminal and concourses. But that’s about to change dramatically. The New York win was a huge one for JCDecaux, which currently trails behind Clear Channel in the U.S. (Denver and Chicago O’Hare, my next airports, are both Clear Channel affiliates.)

If JCDecaux wins LAX (along with the regional Ontario airport), it will effectively control the air corridor that is the cultural spine of blue state America. If Clear Channel wins, it can slam the door on another market in the U.S.—the winner will receive a five-year contract, with a five-year option to renew.

At lunch, LAX concessions manager Karen Tozer and her deputy, Mark Miodovsky, and the airport’s public relations director, Nancy Castles, filled me in on the the last laps of the two-year race for the airport contract. The process began with a request for proposals and eventually yielded 400 potential locations around the airport for static signage, banners, touch screen kiosks, plasma screens and sponsorships similar to what airports like Dallas-Ft. Worth and London Heathrow have done—the former granted exclusive pouring rights in all terminals to Pepsi, while the latter (with the help of JCDecaux) has set aside areas for passenger-friendly services (like banks of power outlets) sponsored by the likes of Vodafone. Planning accordingly, both sides have marshaled small armies of potential sponsors as part of the their LAX bids.

But the winner won’t be the one who slams the most advertisers into the most slots but rather the one that devises the most elegant, non-vulgar commercial messaging tactics that make maximum use of new technologies. “We wanted to really embrace technology,” Tozer said. But all of my lunch companions recoiled when someone brought up the enormous new plasma screens in the baggage claim of Las Vegas’ McCarran airport, which blast non-stop casino ads at their captive audience.

Before lunch, Miodovsky gave me a quick tour of Terminal 2—served by Northwest, Air France, KLM, and several other carriers—to see what he meant. He pointed to the ancient hotel and rental car information kiosks that consisted of little other than postcards and converted rotary phones. “Those could become touch screen kiosks with up-to-date information about a lot more than just hotels. They could be Web-based or custom built.” Upstairs, he pointed at blank walls where banners might be hung, and to a planter containing drooping, sickly palms that “could become display areas that generate revenue,” he said.

Whether that happens will ultimately depend upon the ingenuity of Clear Channel’s and JCDecaux’s final inspection teams and the willingness of LAX to implement them. With best and final offers due is less than two weeks, those planters could well sprout plasma screens by the time Angelenos fly home after Christmas.

PAGE 1  |  Page 2  |  Page 3

Advertising Age  |  September 2005

A Marketing Reporter’s Journey Into Airworld II

A three-week daily series.

Page 1  |  PAGE 2  |  Page 3

Airworld 2

PART 5: ROCKY MOUNTAIN HIGH

The Eerie Isolation of Denver International Airport
September 16, 2005

DENVER—“The tendency in airport gestalt is toward ever-greater autonomy,” architect Rem Koolhaas once wrote. “Sometimes, they’re even practically unrelated to a specific, generic city. Becoming bigger and bigger, equipped with more and more facilities unconnected to travel, they are on the way to replacing the city. The in-transit condition is becoming more universal. Together, airports contain populations of millions—plus the largest daily workforce.”

The words seemed to take on new meaning for me as my ATA flight lowered for its approach toward the incredible 53-square-mile expanse of the Colorado Piedmont, across which sprawls the Denver International Airport. Making the scene below all the more otherworldly were was the central cluster of enormous tent-like buildings that could well pass for the exotic encampment of some alien race in a George Lucas science fiction epic.

It’s easy to sound glib when describing airports as “invisible cities” on the edges of the ones we call home. But the vast, isolated facilities of DIA deserve the title—a decade after opening, it still sits well beyond city limits, protected by four miles of farmland in every direction to prevent Denver’s suburbs from creeping too close. DIA was the last American airport built from scratch (and had been the first since Dallas-Ft. Worth opened 22 years earlier) and may well be the last for another two decades. Just as the mega-airports of Asia—Hong Kong, Seoul and Osaka—were built on islands reclaimed from the ocean, DIA itself is an island reclaimed from the plains.

Although it serves Denver—and is in fact a city agency—the airport’s directors have realized that DIA’s future depends on self-sufficiency and less reliance on the entities it serves—those mercurial, endangered species known as airlines. During a tour of DIA’s concourses, Airport Property Officer Pete Gingras explained its economics to me. DIA breaks even on its revenue from the airlines -– landing fees, rent, etc.—while posting a substantial profit (technically “revenues in excess of expenses,” as DIA is a nonprofit) of $70 million on revenues of $166 million last year, including $31 million from concessions and advertising alone.

Revenues are expected to rise 10% this year, as the low-fare slugging match between Ted and Frontier boosts traffic and drives concessions. Thanks to that cash-flow, Gingras said, DIA is debt-free and able to finance future expansion without taxpayer dollars. (The airport cost $4 billion to build in the first place.) It’s also theoretically able to lower the airlines’ fees as an encouragement for them to stick around.

The facility has just issued new design guidelines for the retail marketers and restaurants in terminals (“We think good design can boost sales 15% to 30%, so it’s really about ROI [return on investment], not just a whim,” Gingras said) and the airport staff is constantly searching for ways to bring in new businesses and tap new revenue streams. DIA even farms the surrounding 16,000 acres with wheat, millet and a sunflower seed field that brought in $300,000 worth last year and drills for oil and natural gas on the property ($1.8 million in 2004, and the airport is planning to drill more wells).

The airport has its own full-sized post office and recruiting center. The concessionaires must constantly replace employees who burn out on the 30-minute commute from Denver, the shuttle buses from employee parking lots, the background checks (the FBI combs back through the last 10 years of each applicant’s past), and the daily crawl through the thick membrane of security. The joke here is that when an employee misses four days but shows up on the fifth, the managers high-five them and thank them for coming back.

But those who stick around—employees and concessionaires alike—are encouraged to experiment. When the franchiser Quizno’s Sandwiches took over its first and only (and now it’s highest-grossing) outlet here, the airport encouraged the chain to open a slightly higher-end bistro offering sit-down meals. “You can’t be everything to everyone in the restaurant business, but in airports, you have to,” said Pete Pflum, vice president of airport operations for Quizno’s.

When the snow begins falling in the winter, each week brings the possibility of being snowed in, forcing the airport to take the final step, if only for a few days, toward total self-reliance. In March 2003, when a blizzard dumped seven feet of snow on each square inch of the mylar-coated roof, the tent began to sag dangerously, forcing its evacuation. There was nowhere to go for 8,000 stranded passengers but deeper into the terminals (the highways leading to the airport were snowed shut). “It’s never 8-to-5 here, ever,” Pflum said.

The decision by DIA’s master planners to keep the airport separate from the city for at least another decade means there is nothing but Airworld for literally miles around. I chose to stay at the hotel closest to the airport, a Ramada tucked inside a pocket of urban sprawl that would not exist without the nearby airport.

This is Airworld’s suburb, which we commute to via shuttle buses that scoop up guests for a half dozen different hotels at a time—the Courtyard by Marriott, the La Quinta, the Days Inn—underscoring their essential interchangeability (or at the very least their common ownership by a local franchisee.) “Holiday Inn Express or Holiday Inn Airport?” my driver asked one passenger. “Which number did you call?” “I don’t remember,” the rider replied wearily. “That was so long ago.”

Out here, we’re reduced for the night to the sum of our brand preferences and loyalty programs. Hertz, Avis or Budget? The Embassy Suites or the Radisson? Dinner at Bennigan’s or the Village Inn? Which one are you? Does it matter? One night, lying in bed, I flipped through a booklet listing every Ramada in the world, and landed on the one at Narita, the international airport outside Tokyo. Narita was once farmland, too, before the Japanese government declared eminent domain and began building. That Ramada and mine must be sisters, I thought. (My stay at my Ramada was comped by the general manager after a few unsuccessful attempts to arrange an interview about his usual customers.)

I walked across the highway the first night for a drink at Bennigan’s. Sitting next to me at the bar was Pete Kourkoubes, a silver-haired salesman for Toromont, a manufacturer of gas compression equipment, who was on the road and eating dinner with a younger colleague. They were in town for a 12-hour meeting that had let out only a half hour before, “and this was the first thing we found,” he said. “This might be the only thing around, we thought.”

He lives in Houston (“I moved there so I wouldn’t fly as much—only 50 times a year now instead of 100.”), flies Continental, likes renting from Hertz (“There’s no paperwork, and I’m gone.”) and was staying at the La Quinta with a corporate rate.

“I have around 300,000 miles,” he said, “and I can’t use them fast enough. I probably have a few free hotel stays somewhere, but I’ll never get around to using those, either. When you’re home, you never really want to travel.”

PART 6: DIET OF A TERMINAL MAN

Navigating the Gastronomic Wasteland of Airport Food
September 19, 2005

DETROIT—I woke up Sunday with a sore throat. It was inevitable. After all, what are airliners if not giant flying thermos bottles that enable every passenger to efficiently share his microbial spew with every other passenger? Before I left,

Sophie had fretted endlessly about the super-germs I was sure to inhale or absorb over the course of my travels. Multiply Los Angeles International Airport’s 60 million passengers per year by the billions of microscopic life forms each one was carrying, and surely something was eventually going to slip by my immune system. To avoid contamination, I shouldn’t just wash my hands, she advised me, but instead wash all the way up to the elbows, the way a surgeon scrubs before entering the O.R. I, in turn, joked that I had a 50-50 chance of coming home early with a severe upper respiratory ailment.

But my weakened condition, I suspected, had less to do with what I was inhaling (although spending another night on the floor at O’Hare probably didn’t help) and more to do with what I’d been eating.

During my first week in Airworld, I’ve eaten a half dozen Clif Bars (for breakfast), in-flight almonds, peanuts, pretzels and trail mix, grazed my way through Presidents Clubs, Crown Room Clubs, Red Carpet Clubs, Admirals’ Clubs and Worldclubs, and eaten more turkey sandwiches that I could bear to count. I’d eaten “Wild Turkeys” in Orlando (because the pepperjack cheese apparently drives them wild), turkey paninis from Starbucks and a turkey on ciabatta from a Chili’s Too at O’Hare that was so stale the bread had the consistency of a Nerf football. I can’t complain about the airline food because in this day and age in coach class, there isn’t any (with the exception of the $8 jerk chicken sandwich I bought on my Song flight, which trumped the turkeys across the board). The best meals so far have been flank steak at Encounter, the ambitious, vaguely Trekkie-themed restaurant in the iconic Theme Building at LAX, and tuna steak Saturday night at DEMA, the restaurant in the Westin Hotel attached to the airport. (Westin PR was paying.)

While still at LAX, I smirked when I spotted Malibu Al’s Beach Bar in Terminal 5, which provided Alan Richman a jumping off point for a sweeping takedown of Airport cuisine (can that word even be used without sarcasm?) in the August issue of Condé Nast Traveler.

“At a time when air travel is expanding,” he wrote, “in-flight meals are disappearing, and time spent in airports is lengthening—a formula one might expect would herald a golden age of in-terminal dining—the food is certainly no better and probably worse than it has ever been: bland, formulaic, and in the case of establishments like Malibu Al’s, dispiriting.”

Richman wonders whether the majority of travelers are so desperate for distraction before boarding that they’re willing to eat just about anything—setting the bar pretty low for airport concessionaires. He’s right, but passengers have only themselves to blame. According to my new friends at the trade publication Airport Revenue News, the “primary dining style” of most airport visitors in 2004 was “indifference.”

When Denver International was still only on the drawing board back in 1991, the master plan called for no sit-down restaurants of any kind because prospective passengers indicated they didn’t want any. Instead, they got the food courts they deserved. When the Quiznos brain trust opened Chef Jimmy’s bistro as an experiment on one of the concourses a year ago, passengers practically fell to their knees to give thanks for the medley of cooked, rather than merely reheated, dishes on the menu. DIA executives told me this shift away from fast food and more toward fast-casual has been 10 years in the making, and that a new round of passenger surveys (the first since 1991) are in the works.

Not that Richman should hold his breath for a “renaissance” anytime soon. After indifference, most passengers care about “healthful” and “low-carb” food, which has translated to the packaged sandwiches I’ve been subsisting on for the past week. The supremacy of fast food has given way to “fast casual,” which would explain why Chili’s Too is seemingly everywhere –- from Orlando to O’Hare to Detroit –- and why Orlando’s latest showpiece restaurant is Romano’s Macaroni Grill.

Airworld is fertile ground for chains, possessing the double advantages of familiarity (with customer) and a reliable track record (appeasing airport operators) that freeze local favorites out. And once a chain has a beachhead in Airworld, it’s only a matter of time before its marketing department is studying timetables and plotting expansion at the most popular destinations. As one restaurant consultant put it in Airport Revenue News, “my recommendation to them if I were doing consulting is if it’s a hit in say, Dulles, then look at the major airports Dulles flies to and then open it up in those airports as well so you can get that brand recognition.”

But sometimes brand recognition blurs into brand mutation. What am I supposed to make of the Fox Sports Skybox bars and grills I’ve spotted in Orlando and O’Hare? What does a burger prepared by an also-ran cable channel taste like? What about the tacos at the Jose Cuervo Tequileria here in Detroit, or the “Caribbean specialties” at the Casa Bacardi in Tampa? (Richman confirmed that the former, at least, had drifted away from its core competency: “The tortillas appeared to have been made out of white flour and chewing gum,” he wrote.) And then there is the Expedia.com Cafe, which I haven’t seen, and which must possess brand synergies I can’t quite imagine (“low fare” has a different connotation in the restaurant business) but which apparently boasts an average customer check 54% higher “than a generic airport bar,” according to its creator, HMShost.

HMSHost (formerly Host Marriott Services) is to airport concessions what Clear Channel and JCDecaux are to their advertising. According to its Web site, HMShost has annual revenues of $1.6 billion and 71 airport locations. It doesn’t just install chains, but invents or imports those seemingly unviable local brands when the opportunity presents itself. When it won the $28 million contract for San Antonio’s airport in 2001, it promised to install a pair of Starbucks, a brew pub, a new sports bar brand created in partnership with former NBA star George “Iceman” Gervin and a Chelsea Sandwiches of Texas.

While passing through O’Hare last week, I decided to taste test the airport’s offered delicacies. I grew up south of Chicago, and so had a mental benchmark against which I could judge the local brands present in United’s wing –- especially the divey Billy Goat Tavern and The Berghoff, a German institution in the Loop. I couldn’t bear to actually eat the O’Hare Billy Goat’s greasy burgers (the same goes for the heat-lamped deep dish pizzas I spotted), but I did make it out to the Berghoff Cafe on United’s outer concourse in order to sample a corned beef sandwich and the Berghoff’s own beer. It only took about a minute for the cafe to deliver a body blow to my expectations when the carver announced my corned beef-on-rye would go without the rye. “We’re out. Whole wheat or a Kaiser.” I chose the Kaiser. He repeated this exchange with nearly every customer. “What do you mean, no rye?” one demanded. “I want to see the manager. I’m serious!”

The meat was cold, the cafe was packed, and despite the wood paneling and stained-glass chandelier, I remained unconvinced that I was anywhere but another outpost of Airworld. I’ll stick to the turkey sandwiches and start taking my vitamins.

PART 7: THE ‘DEMON CUSTOMERS’

Inside the ‘FlyerTalk’ Community
September 20, 2005

ATLANTA—When he coined the term in his 2001 novel Up In the Air, Walter Kirn wrote that Airworld “is a nation within a nation, with its own language, architecture, mood and even its own currency—the token economy of airline bonus miles that I’ve come to value more than dollars. Inflation doesn’t degrade them. They’re not taxed. They’re private property in its purest form.”

The details of this “private property” have changed somewhat since then; frequent-flier miles have been devalued by restrictions and the always-falling price of an economy-class ticket, but they continue to underpin a huge sub-economy and, indeed, a curiously elitest society within the framework of Airworld.

Let’s look at the demographics. Last summer, the media research firm Arbitron released its Airport Advertising Study, a thorough survey of the income and spending habits of American air travelers. Keep in mind that this study was conducted during 2002-03, and that air traffic has only risen, to pre-9/11 levels, since then.

Arbitron found that 92 million Americans had flown at least once in the past 12 months, and that there was a clear demarcation in income between those who fly and those who don’t. Eighteen percent of all passengers have a household income of $100,000 or more, compared to only 10% of the non-flying public. More than half of all passengers had incomes of $50,000 or more, compared to 37% of those who weren’t.

The difference between the “frequent flyers” in Arbitron’s study—someone who taken four or more round trips over the past year—and non-flyers was even more drastic. A third of all frequent flyers make $100,000 or more. They’re luxury consumers, more male (58%) than female, and although they comprised just 18% of all passengers, they absorb 60% of all airport advertising impressions thanks to frequency. There’s a reason Arbitron subtitled the report “Exploring an Undiscovered Upscale Medium.”

But Arbitron’s definition of the frequent flyer doesn’t shed much light on the “road warrior” we know to be at the apex of this demographic pyramid. Who are they? How many of them are there? What do they want? And, of course, what can we sell them?

The best place to start such an investigation is to mouse on over to that point in cyberspace where large numbers of frequent fliers regularly gather: FlyerTalk.com.

FlyerTalk is the community adjunct of the WebFlyer network of Web sites edited and published by Randy Petersen, the media’s go-to-guy on the subject of frequent-flyer miles. But that dry description doesn’t do justice to the impassioned FlyerTalkers who spend a healthy percentage of their non-billable waking life there.

These are, in effect, the airlines’ best customers, and I would argue that in five years or less, they won’t look much different from your best customers –- knowledgeable, permanently plugged-in, eager to be engaged directly by the brands they love (or at least are forced to put up with) and willing to do whatever it takes to arbitrage the opportunities offered to them as consumers into something much grander. FlyerTalkers burn up the message boards with grumpy dissections of bad service, the minutiae of their last trip in first class to Hong Kong and back (there’s at least one thread on FlyerTalk right now criticizing these Airworld dispatches as too bland) and fielding any travel-related question that might appear. “They’re my human-powered, travel-related Google,” one regular told me.

I don’t have FlyerTalk’s membership stats at my fingertips, but the site commands enough power and attention that Continental Airlines CEO Lawrence Kellner invited 274 FlyerTalkers to Houston in April to give their complaints and suggestions a hearing over dinner and drinks. The New York Times caught wind of this meeting a few months later and soberly concluded that “blogs may be grabbing all the media headlines, but online communities like FlyerTalk are wielding a different kind of influence in the corporate world, providing instant feedback from those critics who marketers have called influencers. Just by logging on, companies can study, learn from and even respond to the cacophony of opinions about what they are doing wrong and what they are doing right without spending a dime on focus groups or market research.”

A pack of Scandanavian FlyerTalkers repeated this experiment last month in Stockholm with executives from SAS, and considering the ongoing shift by the major domestic carriers away from highly competitive short-haul U.S. routes and more toward long-haul, international ones (American has shifted 10% to 15% of its capacity in this direction, and United 14%), these kinds of confabs and direct communication with customers will only become more commonplace. FlyerTalk and similarly-minded sites like FrequentFlier.com, MoreMiles.org, TripAdvisor.com and HotelChatter.com are testbeds for the idea proposed by blogging’s standard-bearers that markets and media are conversations, not dumb, one-way messages.

So who are these people who are so carefully watched by aviation CEOs? I met up with a trio of FlyerTalkers at Chicago O’Hare in American Airlines’ Admirals Club to drink on FlyerTalk’s dime and talk about marketers’ pursuit of them. Over the course of two hours, we whipped out our laptops to scour the Web for upcoming deals and surf FlyerTalk (of course!); determined how easy it is to print fake boarding passes at home good enough to bear the initial scrutiny of security screeners (they’re ideal for sneaking into Red Carpet Clubs, for example) and rolled our eyes at the exploits of the mileage runners –- those inveterate flyers who frequently take 24- or 48-hour trips to nowhere in order to pass their accounts or requalify for some lofty status again next year. “It’s like a drug addiction,” said Jennifer Moody, co-founder of the two-person health-care strategy firm AmeriMed Consulting (and FlyerTalk moderator). “Only you’re addicted to the perks and the status.”

“I’ve read that in recent years, Best Buy has tried to weed out what it calls its ‘demon customers.’” said Sameeer Bakhda, a doctor who lives in Chicago. “They’re the ones who clip every coupon, fight over every deal, and basically make themselves a nuisance. Well, we are the airlines demon customers.”

FlyerTalkers have successfully used their communal intelligence and ever-increasing access to formerly privileged information (such as the the airlines’ “fare buckets,” i.e. the pricing data, on each flight) to substitute better information for cash. Thanks to endless cycles of dirt-cheap mileage runs and employer-underwritten travel, they’re able to qualify for elite customer status at a half-dozen different institutions, which in turn pass around free upgrades, tickets, hotel stays, etc. that create the illusion of wealth and a willingness to flaunt it when the reality is often much difference.

While Arbitron’s airport survey might give the impression that the more you fly, the more you make (witness private jet owners), FlyerTalkers’ savviness has essentially decoupled frequent flying from its traditional demographics. They’re younger and more female than the stereotype of the middle-aged, upper-middle-class aerial commuter you’d expect to find in business class. Not that anyone in Airworld wants to hear it.

“A lot of the advertisers still see that same perception,” Moody said. “We had a long thread on FlyerTalk—actually I posted it in both the women traveler’s and American forum—and the reaction in each was 180 degrees different.” She had discovered a job posting on American’s site at American Way, the airline’s in-flight magazine. The posting described the magazine’s readers as “upper-middle class affluent MALES in their forties travelers.”

“Apparently they’ve made some determination that these are their readers. Not that I even flip through it. It gets boring looking at ads for matchmaking services, cigars and condos in Miami.” In any case, the reaction to her post on the women travelers forum was a lot of knowing virtual nodding. The reaction on the American thread by the men present was indignation. “I wouldn’t mind if marketers were targeting me,” she said, “but they’re not.”

PART 8: LOW FARE WARS

The Commodity Airlines That Wish They Weren’t
September 21, 2005

ATLANTA—Today was just another day in Airworld. As they say, if it’s Tuesday, is must be ... Atlanta, in my case. I rolled out of bed (next to gate E18), jumped in the shower (at the Delta Crown Room Club), checked e-mail and somehow still managed to set off late for the office (at gate C20), where I was due to meet AirTran’s director of marketing.

Actually, it was one of the busiest days I’ve spent in transit so far. I was lucky enough to be invited to a party—Song’s unveiling of a pink plane in honor of October’s Breast Cancer Awareness Month—held in one of Delta’s hangars. Several hundred Song employees grabbed sack lunches and milled about as the airline-within-an-airline’s president, Joanne Smith, introduced a video of cancer survivor testimonials. The tie-in makes perfect sense considering the airline’s target demographic, women.

Song was launched after Delta’s internal research demonstrated that 62% of leisure travelers were women, 75% booked their families’ travel plans, and 90% were making the decisions on when and where to travel. Ergo, Song would speak first and foremost as a brand to women.

But that’s a relatively narrow reading of the data, which revealed a broader sentiment among travelers that “uniformity was the enemy, and that travel was tiresome,” said Smith. “What if you could bring the glamour back to air travel? What the industry needs to deliver is a low fare and a better experience.”

The small galaxy of brands that surrounded Song at its birth and continue to do so today—the Dave Lieberman sandwiches, the Rande Gerber cocktails, the Spades’ uniforms, etc.—were designed to link Song with the brands its desired customers have already aligned themselves with, e.g. Whole Foods, the W Hotels, Kate Spade and Jack Spade. (Last month, when I breathlessly explained my premise to the architect David Rockwell, who is designing the interiors of rival JetBlue’s new terminal, he just shrugged. “Of course. People are interested in synergistic lifestyle experiences.” Duh.)

That was the theory. What I wanted to know form Smith and her chief of marketing, Tim Mapes, was whether it was working. The short answer is, Who knows? Its financial performance is buried deep inside Delta’s hemorrhaging balance sheet, and neither Smith nor Mapes is willing to reveal any useful numbers—load factors, costs or revenues per passenger seat mile, passenger yields, anything—“that will almost certainly be read by our competitors,” according to Mapes.

But they did offer a few vague pieces of evidence. Load factors hover around a respectable 80%, Smith said. (Southwest’s and JetBlue’s are stilll higher.) Yields and fares are both rising, and Song is hitting its internal benchmarks, said Smith, whatever they might be. Mapes said some fares have risen about $35 since Song’s inception two years ago, which just about covers the corresponding increase in oil prices during that span. They both vow that the airline’s blizzard of branded amenities—which its competitors view as needless, expensive frills—are profit centers.

“It’s an extremely attractive proposition, that’s all I’ll say,” Mapes said. “It’s more attractive than flying people ... which isn’t that much these days.” Smith was more measured in her answer: “It’s a small profit, and we ultimately have to fill the plane. ... The reality is that there is only a very thin margin from those customers willing to pay. But if [the flight] is priced the same as our competitors and we get the sale, then we’re happy with that. In this market, a thin margin ...” she trails off.

She believes the airline industry isn’t doomed to become a pure commodity business (“Brands will become more important”). And now that Delta is in chapter 11, looking to potentially shed its pension obligations and whatever other costs it can find, Delta is learning a lot from Song—faster turnaround times, greater productivity. It’s not much of a stretch to argue that at this point, if Song were a stand-alone entity, it’d be more valuable than Delta itself.

One of the reasons Delta landed in chapter 11 was because an old-school, low-cost carrier set up shop on its home turf, driving down fares. That was AirTran, the airline formerly known as ValueJet until the infamous 1996 Everglades crash and ValueJet’s subsequent purchase of the smaller (and untainted) AirTran. AirTran has low fares, a business class cabin (upgrades are just $35) and a fleet full of young “baby Boeing” 717s and workhorse 737s. The net result, according to Director of Marketing Tad Hutcheson, “looks like a legacy airline,” with lower fares (and a smaller route system, of course). It looks close enough to have increased its market share at Atlanta Hartsfield—Delta’s home and the busiest hub in the world—from 5% to around 14% during Hutcheson’s time there.

Out west in Denver, Frontier Airlines has pulled a similar trick on United. In July, the airport’s busiest month ever, Frontier increased its market share to a record high 18.5%, mostly at United’s expense. “They started Ted because of us,” said Diane Willmann, the Frontier’s director of advertising. United executives didn’t respond when I brought this assertion up in conversation last week in Chicago, but it is clear that United has spent the last two years trying to swat low-cost carriers popping up in its hubs at Denver (where Ted launched with a legendarily weird guerilla marketing campaign) and Washington Dulles, where Independence Air emerged last year to cannibalize the fares of its former partner. (In a previous life, it was one of United’s regional partners.)

My Independence flight Tuesday night would be the last U.S. leg of my journey before heading abroad Thursday, leaving the low-fare carriers—and the American pod of Airworld—behind.

PART 9: REMAKING NYC’S JFK AIRPORT

Ruminations on the Zen of Terminal Structures
September 22, 2005

NEW YORK—I’m home, sort of. By “home” I mean the terminals of John F. Kennedy International, New Yorkers’ airport of last resort; a place with a history of crime, grime and unmet expectations.

But even as it trails behind other New York metro airports JFK is finally experiencing some much needed gentrification.

When the original terminals were completed in the mid-1960s, they were unsarcastically referred to as the “Seven Wonders.” Between the soaring arch of the International Arrivals Building (IAB), the instantly iconic Eero Saarinen TWA terminal, the flying saucer of the Pan Am Worldport or the largest stained-glass window in the world on the front of American’s terminal, JFK was the last word in flashy, chic airport design. And then it gradually all fell apart, as passenger levels reached capacity and continued to climb, ultimately outstripping the infrastructure. The 220-acre Liberty Plaza in the middle of the infield was torn up for more parking. So were the chapels that overlooked their own grotto. Eastern and Pan Am went out of business. American finally abandoned Saarinen’s woefully underequipped terminal after completing the absorption of TWA in 2001.

But the airlines began to reverse JFK’s entropy in the late 1990s, tearing down Eastern’s deserted building with a new terminal for a consortium of foreign carriers, followed by the death and rebirth of the IAB as Terminal 4, a miniature version of Amsterdam’s much-admired Schipol airport.

And this summer, American finally opened its new $1.1 billion terminal to replace the crumbling Terminals 8 and 9. Nearly put into cryogenic suspension during American’s brush with chapter 11 a few years ago, the new terminal is the first one built for a single airline at JFK since the ‘60s.

Next up is JetBlue’s $875 million new home slated to be built behind Saarinen’s terminal, which will be preserved as a restaurant or a museum, or something along those lines. (An RFP is being prepared by JetBlue.) The groundbreaking is set for next month, and is due for completion in 2008. (Don’t expect any delays –- JetBlue has been forced to spend another $25 million on temporary gates at its current terminal just to tide over its swelling number of flights.)

Which is to say that JFK is once again the best-tested in the country for answering this question: What do we want from our airport? What we don’t want is a decrepit, overcrowded mall (Atlanta) or a sprawling amoeba with seemingly a dozen different limbs. But do we want a bigger, brighter mall with lots of breathing room (like the new international Terminal D at Dallas-Ft. Worth) or something else completely?

American’s new terminal might best be described as “reliably handsome.” It has the requisite soaring ceilings in the ticketing hall (rising to 65 feet high), an exposed steel skeleton and acres of terrazzo flooring. It isn’t claustrophobic, it certainly doesn’t look cheap, and if it isn’t as inspirational as Saarinen’s terminal across the infield, then so be it.

“Like in everything else, form follows function,” the terminal’s onetime project manager, architect David Brown, told me. “Because you have these flows of people, you need large spaces, and you have to put the ceilings high. It’s obvious in hindsight.” He added, “Airports and the design of terminals are sort of mini-urban design programs, like building a road or a high-rise. There are all these concepts at play, and all the airlines know them.” In other words, it may not be a classic, but it wasn’t obsolete by the time it opened, either.

But is there another way? Maybe David Rockwell will find one. “You’re so unaware when you go to an airport that you’re getting on these many-tonned metal machines when you take off,” he explained. “What are the emotional needs of passengers leaving New York, and arriving in New York?”

JetBlue has hired Rockwell to develop the master plan for its proposed terminal’s interiors (the overall design is by the architectural firm Gensler). Rockwelll and his firm are best known for their playful and theatrical designs of restaurants, theaters, baseball parks and even a children’s hospital, but never an airport. (As fate would have it, he is currently working on the theatrical staging of Catch Me If You Can, the Steven Spielberg film partially shot inside Saarinen’s building.)

As it happens, airports have been on Rockwell’s mind for years. He most recently chaired a discussion group at the Technology Entertainment Design conference in Monterey, Calif., in which one of the younger participants argued that the ideal terminal is a non-one: You should just be able to walk up, walk through security and get on the plane.

I met with Rockwell in his office last month to talk about the guiding principles he planned to bring to the terminal. His hiring, I believed, was symbolically significant –- it meant that airports were ready to move beyond being merely gargantuan people-processors efficiently spitting passengers onto planes after they’ve been sedated by greasy food and shopping. Perhaps they could assume a starring role again in the urban framework.

His approach would be guided by three ideas, he said: “New Yorkness,” i.e., creating a sense of place; “JetBlue-ness,” i.e., reflecting the brand; and “usefulness,” i.e., no frills or empty gestures. In practice, that meant no soaring ticket hall –- because passengers have less and less need for ticket counters thanks to kiosks and Internet check-in –- and toward a “great space” on the far side of security.

Within this great space, illumination will be provided by a giant ring of departure and arrival screens (“What if we can de-escalate the tension of not knowing as soon as they arrive?” he asked rhetorically) and viewing platforms placed in the center of the hall will divert departing passengers away from arriving ones even as they provide the sort of voyeuristic function that stoops and the steps at the Metropolitan Museum of Art perform in the city itself. If any of that sounds corny, don’t even ask about the choreographer he brought in to help discern the flow of traffic.

“What was romantic about that 1960 era was that it was sexy, it was glamorous, it was the Jet Set and you could go anywhere,” he said. “None of that matters anymore –- sex is already everywhere. Our sense of style in this terminal will come out of solving problems, and making an airport feel like a sedate mall. I don’t know that getting food quickly leads toward Taco Bell and McDonald’s. You could just as easily have sandwiches provided by Jean-Georges [Vongerichten]. When we did Vong [one of Vongerichten’s restaurants], we put in a cafe there which essentially serves fast-food, pre-packaged sandwiches.” (They will undoubtedly have turkey if this vision comes to pass.)

“And the retail, when it opens, will have roll-up garage doors, so it’s more analogous to a market. I look at Union Square Market from my window every day, and I see how it’s a multipurpose space. A terminal is like that—it’s a microcosm, a miniature version of a thing that exists somewhere else. And making it a mall is not the best solution. I don’t think it’s very vibrant.”

He’ll have his chance soon enough.

PART 10: BIRTH OF THE BOUTIQUE AIRLINE ERA

Three New Carriers Take ‘Lifestyle’ Marketing to the Next Level
September 23, 2005

LONDON—As my Virgin Atlantic flight delivered me into the European pod of Airworld, I couldn’t help but reflect on how the marketing of such international travel is being revolutionized.

In fact, I’ve been flying through some of the changes in real time this last week. Just days ago, I attended a plane’s debut in a Delta hanger in Atlanta with a few hundred Delta/Song employees. But today I wonder how many of those same people will be gone after Delta completes its chapter 11 restructuring. The plan calls for up to 9,000 layoffs as well, reducing domestic capacity by up to 20% in favor of boosting the number of international seats by 25%.

Delta is following American and United, which have already shifted 10% to 15% of their domestic fleets to international services. Why? Because there are fewer low-cost competitors and higher margins along those global routes. The legacy U.S. airline brands are now subsidizing their unprofitable domestic businesses with fat margins from their international operations. But even as Delta catches on to this established trend, the trend itself is about to change.

The “lifestyle” flight services popularized with the American masses by JetBlue and Song have laid the groundwork for a new niche of higher-level lifestyle international flight services. Just days ago a business-class start-up named Eos Airlines began booking fares for its inaugural flight between New York’s JFK International and London. Simultaneously, another business-class-only carrier called MaxJet also began service from JFK to London.

Three months from now, MiMa, a members-only luxury charter airline whose name is a MoMA-esque abbreviation of “Milano-Manhattan” will fly between Milan and New York.

Both Eos and MaxJet aim to undercut the fares offered by the heavyweights on the JFK/London Heathrow route, which is already served by 17 flights each day. Eos is promising the more luxurious service, having outfitted its three Boeing 757s with just 48 seats (a normal configuration has about 180) that offers more leg room than the square footage of most cubicles. And its full-fare price of $6,500 round trip is about 20% lower than comparable fares on British Airways or Virgin Atlantic.

MaxJet is offering a more traditional product on Boeing 767s configured entirely with business-class seats, but at the relatively rock-bottom base fare of $1,600 round trip. “We’re after the business fare traveler looking to book close in [to their departure date],” said MaxJet CEO Gary Rogliano. “We’ve taken the low-fare model and used it in the business cabin.”

MiMa is taking the unique approach of encouraging individuals and corporations to enroll as “members” in its (as yet unpriced) service, which may end up including concierges in both cities it serves, and a top-secret, high-speed transport to and from Milan’s airport. One of its professed goals is to promote “greater cultural understanding” between the financial elites of Wall Street and Italy. Unlike Eos or MaxJet, it won’t sell seats at a discount on its route. “We want to give a private jet experience priced at a little higher than normal business class,” said Armando Brunini, vice president and chief commercial officer of Eurofly, the company that will operate MiMa’s service.

They aren’t the first business class- or first class-only carriers to emerge against the Big Six domestic carriers. Kirk Kerkorian lost a bundle on his MGM Grand airline, and Legend Air once challenged American Airlines on its home turf in Dallas before disappearing into bankruptcy. And even if all three newcomers launch with full flights, their impact on their competitors’ earnings next year will still be negligible. Eos, for example, hopes to have 20 aircraft flying on a handful of routes after five years. (During the same span, JetBlue took possession of more than 80 aircraft and now serves 33 destinations.)

However, the important point is what their sudden collective appearance symbolizes—the beginnings of a wave of boutique brands made possible by the airline industry’s non-existent barriers to entry. Twenty-five years ago, Anouska Hempel and Ian Schrager ushered in the era of the boutique hotel; we now appear to be witnessing the birth of the same movement in the airline industry.

All three are deploying JetBlue’s successful variation on the low-cost-carrier model to business and first-class flights. All three are well-capitalized, all three are flying new planes, and all three plan to undercut the appeal of the establish carriers along their routes using the combination of lower fares and a level of product and service that’s the same or better than the competition.

With passengers gravitating toward flights that are either very inexpensive (the domain of the low cost/low fare carriers) or luxurious (especially on long-haul routes) and doing their best to avoid the middle—the usual hub-and-spoke flights, which Delta also plans to reduce while in bankruptcy—the airline industry may finally be bifurcating.

“Go into the terminals and watch the cross-section of people walking by,” Eos CEO David Spurlock commanded me when we spoke. “The world hasn’t seen that kind of cross-section of customers since Sears & Roebuck lost its relevance decades ago. Retail went through its bifurcation in the ‘70s and ‘80s, the auto manufacturing business went through its bifurcation in the ‘60s, and the PC business went through it in the ‘90s. And the airline industry is leaps and bounds behind them.”

Before launching Eos, Spurlock was the director of strategy at British Airways, in charge of developing the carrier’s route network. “The hub-and-spoke carriers try to be all things to all people. They serve short- and long-haul point-to-point passengers using giant hubs to navigate their journeys—typically in lowest cost fashion available. That structure doesn’t work, and the low-cost carriers have proven they can just sweep the domestic market away. We feel we’re Tiffany about to take on Sears in the jewelry market. They’ve got losses, and they’re hoping that jewelry will foot the bill for their other loss-generating product categories.”

That may be true, and the reason I’ve embarked on the international leg of this trip is to test a few of the luxurious long-haul carriers that Eos, MaxJet and increasingly desperate domestic carriers would rather compete with than Southwest. I’ll have a better idea of what they’re up against a week from now, when I’m stuffed with satay in Sinagpore Airlines’ Raffles (i.e. business) class en route over the North Pole.

PART 11: INSIDE THE AIRPORT ADVERTISING BUSINESS

JCDecaux’s Man in London Provides an Educational Tour of Heathrow
September 26, 2005

LONDON—Here at Heathrow I’ve hooked up with JCDecaux Airport’s managing director in the U.K., Don Sperring, who volunteered to help me better understand how to “read” the advertising landscape of an airport.

Puckish and passionate about airports –- “glass cathedrals,” as he describes them—Sperring’s domains included five in and around London (Heathrow, Gatwick, Stansted, Luton and Southampton) and three in Scotland. He and I were of like minds as far as Airworld was concerned. Before the tour, he loaded up his standard-issue deck of Powerpoint slides for pitches. “Imagine a city with a population over 128 million. ... A city that regenerates itself every day. ... A city with dynamic growth. ... A city with a population unlike anywhere on Earth. ... A city called Airport.”

That “city” is larger than Tokyo, New York, London and Paris combined, if you’re willing to accept the 128 million annual passengers who flow through the five London airports under contract with JCDecaux (a sixth, London City, isn’t) as full-fledged citizens of this city in the sky. Within this aeropolis, Heathrow is analogous to The City (i.e., London’s financial district), with 26 million business travelers per year; Stansted is a suburb of 20-somethings; and Luton (the home of easyJet) is evidently the airport equivalent of New York’s Williamsburg, a hub for cheap-thrills-seeking hipsters.

But, like in any city, there are good blocks and bad ones, hopelessly cluttered public plazas and tony addresses that command premium rates. Near the beginning of our tour, Sperring led me away from the pandemonium of Terminal 1’s general check-in area toward British Airway’s exclusive private reserve for elite passengers. Near the entrance, the floor-to-low-ceiling advertising light boxes were filled with blue-chip financial services, technology and consulting companies. Because of their proximity to British Airway, Sperring explained, these cost “four to five times more” than the lightboxes in the main hall. And inside the check-in lounge itself, Accenture had secured the exclusive presence of its ubiquitous Tiger Woods ads. “What they’re getting out of it is the direct association with this premium audience,” he said.

And how much does premium placement like this cost? Well, Sperring said, he doesn’t have a rate card. “It’s a bit like how you would value real estate,” he said. “You’re always constrained by the question of what is other advertising in that environment worth? You’re always benchmarking to X for that ad, or Y for that one, but how much else have you got for sale? There is an enormous amount of elasticity here in the airport, whether you’re talking about airline tickets or the media for sale. The prices are this wide,” he said, holding his arms apart, “and the market will more often than not decide for you. The equation might be something like, ‘We’re getting X for this ad, and Y for that one, and 67 million passengers come through here each year, and how much wow-factor does the space have, and who else is interested in the space?’ And then you say, ‘Right, that’ll be 160,000 pounds.’ Eighty percent of what we sell here is bespoke for our advertisers. It’s less of a science than an art.”

There aren’t many spaces with a “wow factor” inside Terminal 1, one of the oldest and most extended of Heathrow’s five terminals. (Terminal 5, which is still under construction, is the future home of British Air’s Heathrow operations and will begin life with 30 million passengers a year from the day it opens in 2008.) The low ceilings and narrow corridors make huge banners or vista impossible, and every square inch of the walls seems covered in JCDecaux’s advertising, plugs for the terminal’s duty-free shopping, signage or all of the above. “It’s like they’re afraid of white walls here,” Sperring said at one point.

Still, whether it’s JCDecaux, ClearChannel or one of the handful of smaller players in the market, airport advertisers have a knack for continually squeezing new inventory out of an overlooked wall, or out of the side of a parking garage that could bear to have a banner mounted it, or even from the ventilation ducts. The week before, during my tour of O’Hare with Clear Channel’s operations manager, William Hickok, he pointed out a ubiquitous Toyota campaign that had been themed to a recent convention in town. It had been an excuse to place ads in previously uncharted territory –- banners hanging from formerly blank hallways; wall mounts where there had been none before. Winning approval from the City of Chicago Department of Aviation had been a bear, as usual. “You have to go through 50 phone calls and 10 meetings” before they consider anything, Hickok said, and some advertisers will never be found in departure halls. “I got a call from a guy in Atlanta selling vodka who wanted to advertise,” Hickok told me. “I made a call, and O’Hare said ‘No thanks.’”

But as long as there’s demand, inventory will be found. Sperring also showed me the pitch for the “Lightwave” site, a complex billboard/optical illusion that will fill a traffic island in the center of Heathrow’s terminal complex after the latest fit of construction is finished. The initial asking price for the site is half a million pounds—about $887,000—although I was unclear on the duration of the deal. Even more amazing is the scale model of the Concorde British Airways had paid to place at the traffic entrance to Heathrow, which I heard on deep background cost the airline 850,000 pounds for a long-term deal. (Sperring had no comment on it.)

The workhorses of airport advertising, however, are the light boxes lining the walls (especially prevalent at O’Hare and elsewhere in the U.S.) and the stumpy, rotating kiosks throughout Heathrow. Sperring believes these will eventually give way to new technology: “They were built for older airports, really. And as airports start to change, and become more of a glass cathedral, things like this have fulfilled their usefulness and evolve into screens.” A few screens are already visible at Terminal 1, where ads share space with arrival and departure information, “but in Europe, we haven’t reached that tipping point yet. I don’t think you can say ‘no’ to them, however. I think it will be the future of small-form airport advertising.” Back in America, O’Hare has already received a few digital displays in the food court of American Airlines’ terminal (which had yet to display any ads), but a few are slated to hang in the vaulted ceiling of United’s terminal, and Accenture has been pressuring Clear Channel to install interactive touch screens for its ads in some O’Hare’s most prime real estate.

An ultimately more important trend, in Sperring’s opinion, is the underwriting and branding of airport services. To give you an idea of what that means, consider this: While waiting for my flight from Heathrow to Paris Charles de Gaulle to board, I watched CNN’s coverage of Hurricane Rita on a Samsung flat screen not 20 feet from a T-Mobile stand advertising its pan-airport Wi-fi coverage, while nearby, a row of Internet terminals sponsored by Spectrum.net offered pay-by-the-minute Internet access. And then there is the massive Vodafone display in the heart of Terminal 1 –- a semi-permanent theme park where “you can physically put brands into people’s hands without the fear that they’re going to run off with the stuff,” Sperring said. “They’re having a direct interaction with their clients at a time, perhaps, when their service is most valued. And, of course, those people have a lot of dwell time on their hands, so what else are they going to do?”

Vodafone’s stand also serves Sperring’s goal of moving away from static, pre-sized displays and more toward ads that morph to fit specific contexts. As new “glass cathedrals” have come into being in Europe (at Charles de Gaulle) in America (new terminals at JFK and Dallas-Ft. Worth) and especially Asia, the challenge has been to find a place for advertising within giant glass boxes or halls hundred of feet wide. “We try to borrow from the building’s structure,” he said, and one example with a high wow-factor is the elliptical Emporio Armani ad that covers one entire end of Terminal 2F at Charles de Gaulle.

As both the airports and airlines realize there is more and more essentially free money to be had by covering every available space in ads, the advertisers themselves have responded by marching through the airport, down through the jetways (which United has begun selling at O’Hare, and which Sperring sells to HSBC inside and out at Heathrow) onto the tray tables (a company called Skymedia already has deals with America West and US Airways) and eventually onto the planes themselves (Ryanair, the lowest of the lowest cost European carriers, has experimented with this).

Next up might be your cell phone. Considering that the airlines (and perhaps, by extension, the airport) know when you’re leaving and know where you’ll be leaving from, text messages paid for by duty free boutiques or local concessions could apprise travelers of their existence or offer them coupons. “But who owns that information?” asks Sperring. “I think the airport would argue that it owns the flight information, but the airline would argue that it owns the passenger.” And I argue that in the U.S. at least, the sharing of that information between those entities, no matter what the size of the cut involved, would be seen as an egregious breach in privacy.

The relationship between the airport, airlines and the advertising overseer is always a touchy matter. Sperring has it easy in London because Heathrow’s parent, BAA, unequivocally controls the airport, while at LAX, for example, all but a few of the terminals are leased to the airlines, and even at O’Hare, Clear Channel only controls the central corridors –- the carpeted gate areas are the airlines’ own. This leads to sticky situations like the one I stumbled into in Chicago. Clear Channel’s Hickok was under the impression that American Airlines will agree to lease it one of the choicest pieces of real estate in the entire complex –- a blank wall where American’s terminal splits in two. It’s Accenture’s ideal location for its touch screen, but American apparently isn’t having any of it. “They can’t have it,” the airline’s local rep told me, and she made it clear this was American’s last word on the subject.

And even the airport itself may have ideas that run counter to advertising. At Heathrow, which at times resembles a collection of luxury shopping malls with extremely tight security, Sperring and his team have made less headway placing ads in the main shopping corridors. “The lounges are the final frontier,” he said. “Here in the U.K., they want to keep passengers shopping and keep them eating.” His comment echoed what LAX’s Mark Miodovski had told me two weeks before about one of the airport’s historical objections to advertising: “If they’re looking at an ad, they aren’t busy buying things.”

Speaking of LAX, final bids are due today in the bake-off between JCDecaux and Clear Channel for the next 10 years of its advertising existence. Plasma screens, floor-to-ceiling displays, omnipresent billboards and temples to telecom companies—- do they know what they’re in for either way it goes?

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Greg Lindsay is a journalist, urbanist, futurist, and speaker. He is the director of applied research at NewCities and director of strategy at its mobility offshoot CoMotion.  He is also a partner at FutureMap, a geo-strategic advisory firm based in Singapore, a non-resident senior fellow of The Atlantic Council’s Foresight, Strategy, and Risks Initiative, and co-author of Aerotropolis: The Way We’ll Live Next.

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